Global Economy
Commodity prices down in 2013; Gold plunges; US dollar and euro rise
By Finfacts Team
Jan 1, 2014 - 4:20 AM

Commodity prices fell in 2013 for the first time since 2008 as the Federal Reserve announced a taper of its month bond purchases; China scaled back metal demand while record harvests are maintaining a downward pressure on food prices and gold and silver plunged the most since 1981 against a backdrop of improving prospects for the world economy. In the currency markets, while the euro rose against the US dollar, the currency is up against most other currencies.

The Wall Street Journal says that the S&P GSCI gauge of 24 commodities slipped 2.2%, its first annual retreat since 2008. Corn has slumped 40% in 2013, its biggest drop since at least 1960. Gold has plunged 28% this year, its first annual decline in 13 years. US natural gas led gains by commodities this year, rallying 26%.

West Texas Intermediate oil fell had an annual gain of 7.2% while Brent, the North Sea benchmark and the main one for international pricing, was flat.

Macquarie, the Australian investment bank, said last month that it expected food prices to decline by 11% in 2013 and by 10% in 2014. The bank’s Macquarie Agricultural Commodity Price Index is forecast to rise 2.8% in 2015.

The Journal said investors of all stripes slashed their gold holdings in 2013. "Physical gold held by exchange-traded funds, which buy and store the metal on investors' behalf, fell from 84.58 million troy ounces at the start of the year to 57.7 million ounces on Dec. 31, according to HSBC. This is the lowest level of gold ETF holdings since 2009."

In addition, speculative traders on the Comex exchange whittled their net bullish wagers from 18.9m ounces to 2.7m ounces.

On currencies, The Wall Street Journal Dollar Index, which tracks the dollar's value against a basket of widely traded currencies, ended 2013 at 73.828, up 4.8% this year. This marks the index's biggest yearly rise since its 8% gain in 2008, according to the newspaper.

Among major currencies, the worst performer against the dollar was the yen, which has declined 21.4% this year as a consequence of the Japanese government's efforts to stimulate the economy. The yen depreciated to ¥105.28 per dollar from ¥.74 per dollar at the start of the year.

Australia's currency also had a weak year amid slowing Chinese demand and falling prices for Australia's commodities exports. The Australian dollar was at $0.8916, down 14.2% against the US dollar this year.

However, the dollar did fall against European currencies. The best performer of 2013 among major currencies was the euro, which had a 4.1% gain against the dollar as the Eurozone crisis eased. This is the first time that the single currency has led the pack since its launch 14 years ago. The euro closed  the year at $1.3742. The Swiss franc came in second place with a 2.5% gain against the dollar this year, trading at CHF0.8926.

The Chinese yuan, up 2.8% for the year, hit a record on Tuesday at 6.05 against the US dollar.

Most Asian currencies have lost ground against the dollar this year. The Indonesia rupiah is down 21%, the Indian rupee has fallen 12%, the Philippines peso has lost 8% of its value, and the Malaysian ringgit and Thai baht are both down almost 7%.

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