4663 commodities collapse year 2008 month 10 itemid 127

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Commodities Collapse

Written by Paul Amery

  
October 17, 2008 10:32 (CET)

I’ve taken a selection of single-commodity ETCs, plus the broad DJ-AIGCI tracker from the ETF Securities stable and compared yesterday’s closing prices with the year’s highs, showing the dates of the highs and the respective declines in percentage terms.

 

 

 

Price at Close 16/10/08

Price at 2008 peak

Date of 2008 peak

Decline from 2008 peak

ETFS Physical Gold

PHAU

78.24

103.91

17-Mar

24.70%

ETFS Physical Silver

PHAG

9.38

21.14

17-Mar

55.63%

ETFS Crude Oil

CRUD

41.74

88.34

15-Jul

52.75%

ETFS Natural Gas

NGAS

1.46

3.26

2-Jul

55.21%

ETFS Aluminium

ALUM

6.14

9.82

11-Jul

37.47%

ETFS Copper

COPA

25.06

48.57

17-Apr

48.40%

ETFS Wheat

WEAT

2.74

7.00

12-Mar

60.86%

ETFS Soybeans

SOYB

11.88

23.30

4-Jul

49.01%

ETFS Sugar

SUGA

11.25

21.05

4-Mar

46.56%

ETFS All Commodities

AIGC

14.24

25.21

11-Jul

43.51%

 

The declines have been spectacular, with the broad DJ-AIGCI index down 44% in little over three months, and silver, crude oil, and natural gas all down over 50% from their highs. Gold is a relative standout, falling by only a quarter since its March peak, as the financial turmoil has driven investors into the metal.

There’s a visible double top in prices – most of the individual commodities peaked in March/April, with crude oil, natural gas, aluminium, soybeans and the broad index hitting highs in July.

ETF Securities’ assets have fallen too – from a peak of around $10 billion to just over $7 billion last week – though by less than the broad index, reflecting continuing client inflows.

Is this a buying opportunity? If you’re in the Jim Rogers camp, we’re still in a bull market for commodities, so this is indeed. The bulls’ argument must be that the steepness of the recent decline reflects deleveraging and the raising of cash by investors.

One relative value trade catches the eye. The gold/silver ratio – which in many countries was fixed at 16 for centuries – is at historic highs of over 80 (as was recently pointed out by Brad Zigler at Seeking Alpha) making silver look extremely cheap on a relative basis.

 

 

 


The views expressed by those blogging are for informational purposes only and should not be construed as a recommendation for any security.
 

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