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Van Eck Global - since 1955 
Fiscal Cliff Looms; Commodity Performance Mixed
Commodity Weekly Update: Ending Friday, November 16, 2012  

Macro Landscape: Last week, commodity indices experienced mixed performance as fiscal cliff negotiations began and the S&P 500® fell nearly 2%. President Obama’s meeting with Congressional leaders seemed to increase confidence in the nation’s ability to avoid the fiscal cliff. A decline in the Eurozone’s GDP confirmed that the region is in its second recession in three years. Minutes from the latest Federal Open Markets Committee ("FOMC") meeting indicated that central bankers may replace Operation Twist with alternative stimulus measures once the program ends in December.

Sector Performance: Energy was the best performing sector of the week as geopolitical tensions between Israel and Hamas took center stage and elevated oil prices. Natural gas advanced on shrinking U.S. inventories. Industrial metals moved higher on U.S. housing optimism and copper prices finally found support. Precious metals moved lower but may benefit from the next Federal Reserve policy meeting on December 12. Agriculture was the worst performing sector, led by a plunge in soybean prices that reacted to reports that China has canceled imports.

UBS Bloomberg Constant Maturity Commodity Index
(CMCI) vs. Traditional Commodity Indices
Performance as of 11/16/121 
  Total Return Impact of Roll Yield
  Week  YTD  Week  YTD 
CMCI  -0.20%   1.30%  -0.04%  -0.63% 
DJUBS  0.11%  0.27% -0.28% -4.32% 
S&P GSCI -0.09%  -1.30%  -0.18%  -0.15%
CMCI Sector Performance1 
  Total Return Impact of Roll Yield
  Week  YTD  Week  YTD 
Energy 0.73%  -1.10%  -0.02% -1.23% 
Industrial Metals 0.72%  -3.03% -0.04%  -2.02%
Precious Metals -0.90%  9.84%  -0.01%  -0.69% 
Agriculture -2.16%  4.99% 0.00%  2.80% 
Livestock 0.34% -5.67%  -0.43%  -8.93% 
Roll Cost of Front Month
Commodity Futures Curves
 
Highlights: Brent backwardation narrowed and WTI contango widened. Wheat contango widened and natural gas contango narrowed.  
Commodity  Weekly Roll Cost
Week Ending 11/16/12
Weekly Roll Cost
Week Ending 11/9/12
Aluminum  -2.74%  -4.29% 
Brent  -8.22%  -10.53% 
Cocoa -8.16%  -4.16%
Coffee C 15.36% 14.69%
Copper 0.40% 0.16%
Corn  2.07%  2.05%
Cotton #2 -0.87% 3.72%
Gold 0.77%  0.73%
HH Natural Gas   42.56%  52.17%  
Lead -1.38%  -1.38% 
Lean Hogs 55.41% 49.27% 
Live Cattle 19.91% 18.45%
Nickel 1.75%  1.14%
Palladium 0.62%  -1.79%
Platinum -1.16% 0.87%
Silver 2.58%  4.32%
Soybeans -5.66% -6.05%
Sugar #11 -1.80%  1.57%
Tin -1.46% -1.06%
Wheat  7.56%  7.14% 
WTI  7.26%   6.78% 
Zinc 3.68%  3.74% 
 

Roll cost refers to the percentage lost from rolling an index between futures contracts at expiration dates. If a roll gain has occurred, then a negative symbol is used to signify a negative cost or, in other words, a gain. In the short term, roll costs signify contango and roll gains signify backwardation.

About the CMCI: CMCI is a next generation commodity index diversified across maturities. By spreading its exposure across multiple maturities and maintaining a constant maturity per commodity, the Index seeks to mitigate roll costs.

 

STAY INFORMED

Read Our White Paper: Expanding Asset Allocation Programs with Next Generation Commodity Indices.

Learn about Van Eck's Commodity-Related Solutions.2

More Details about Van Eck's CM Commodity Index Fund.  

Data Sources: The Hard Assets Investor Contango Report; Bloomberg.
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1All indices are unmanaged and include the reinvestment of all dividends, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index's performance is not illustrative of a fund's performance. Indices are not securities in which investments can be made. Results reflect past performance and do not guarantee future results. This performance is historical and is provided to illustrate market trends. The DJUBS is composed of futures contracts on 19 physical commodities. The S&P GSCI is composed of futures contracts on 24 physical commodities, with high energy concentration and limited diversification. Both indices buy and sell short-term (i.e., "front month") futures contracts. In comparison, the UBS CMCI is composed of futures contracts on 27 physical commodities and buys and sells contracts with maturities of three months and, for some commodities, up to three years.

2Please note that Van Eck Securities Corporation offers the Van Eck CM Commodity Index Fund ("Fund") that invests in the asset class included in this email.

If this material is distributed outside of your firm, you are responsible for ensuring that the distribution complies with applicable laws, rules and regulations.

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You can lose money by investing in the Fund. Any investment in the Fund should be part of an overall investment program, not a complete program. Commodities are assets that have tangible properties, such as oil, metals, and agriculture. Commodities and commodity-linked derivatives may be affected by overall market movements and other factors that affect the value of a particular industry or commodity such as weather, disease, embargos or political or regulatory developments. The value of a commodity-linked derivative is generally based on price movements of a commodity, a commodity futures contract, a commodity index or other economic variables based on the commodity markets. Derivatives use leverage, which may exaggerate a loss. The Fund is subject to the risks associated with its investments in commodity-linked derivatives, risks of investing in a wholly owned subsidiary, risk of tracking error, risks of aggressive investment techniques, leverage risk, derivatives risks, counterparty risks, non-diversification risk, credit risk, concentration risk and market risk. The use of commodity-linked derivatives such as swaps, commodity-linked structured notes and futures entails substantial risks, including risk of loss of a significant portion of their principal value, lack of a secondary market, increased volatility, correlation risk, liquidity risk, interest-rate risk, market risk, credit risk, valuation risk and tax risk. Gains and losses from speculative positions in derivatives may be much greater than the derivative's cost. At any time, the risk of loss of any individual security held by the Fund could be significantly higher than 50% of the security's value. Investment in commodity markets may not be suitable for all investors. The Fund's investment in commodity-linked derivative instruments may subject the fund to greater volatility than investment in traditional securities. For a description of these and other risk considerations, please refer to the Fund's prospectuses, which should be read carefully before you invest. Again, the Fund offers investors exposure to the broad commodity markets, currently by investing in a combination of commodity-linked structured notes and swaps. The Fund has obtained a private letter ruling from the IRS confirming that the income produced by certain types of structured notes constitutes "qualifying income."

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