Today truly proved to many investors why commodities are such an important aspect of any portfolio; major equities struggled due to yet another day without a debt deal, while nearly every major commodity finished up on the day. Though the strong commodity performance was partly due to a struggling dollar, a number of other factors converged to give some futures an especially robust day as far as performance is concerned. While gold put in a positive day, oil finished relatively flat, while the UBS Bloomberg CMCI index gained a healthy 15.7 points in today’s session. Though many commodity indexes are down from their April highs, the past few weeks have slowly formed an upward trend, giving investors hope for a strong future performance.
One of the biggest commodity winners on the day was cotton, which was featured just yesterday as one of the biggest losers. Though one of the world’s largest producers commented that cotton prices would be volatile in coming months, few could have predicted the fluffy commodity’s rapid turn around in Tuesday’s trading. Cotton prices rebounded from their 10-month low due to concern in unusually dry weather in the U.S., one of the world’s largest producers. “Just 29 percent of the cotton crop was in good or excellent condition on July 24, compared with 68 percent a year earlier” according to the U.S. Department of Agriculture. In total, cotton futures jumped 4.1% on the day to eclipse the 100 mark in near month contracts [see also Ultimate Guide To Cotton Investing].
While this section is normally left for the commodity loser, today was such a strong day across the board that it demands a highlight of yet another strong performer, in this case copper. The red metal’s surge comes as a five-day ongoing strike at the world’s biggest copper mine has many investors worried about a global supply shortage.
“A strike at BHP Billiton Ltd.’s (NYSE:BHP) Escondida mine entered a fifth day as Chilean labor authorities prepared to mediate talks between union and company officials. The stoppage has cost about 12,000 metric tons in lost output, said Roberto Arriagada, a union director” write Agnieszka Troszkiewicz and Yi Tian.
All in all, copper posted gains of 1.7% Tuesday to finish just two cents below the $4.45/lb. mark [see also Ultimate Guide To Copper Investing].
Charts courtesy of Barchart.
Disclosure: No positions at time of writing.