Written by Sumit Roy  |

January 04, 2013

Week In Review: Gold & Silver Sink As Fed Signals End Of QE, NatGas Plummets, WTI Outperforms

Details

We examine this past week's commodity performance.

Commodities were mixed this week, but stocks surged more than 4 percent in the period as traders cheered the resolution of the “fiscal cliff” saga. The S&P 500 is already up 2.6 percent year-to-date after gaining 13 percent in 2012.

Macroeconomic Highlights

Most commodities got a boost early in the week after Congress passed a bill to avert the fiscal cliff, ending a contentious saga that threatened to push the U.S. economy into a recession.

However, on Thursday, commodities—led by gold and silver—fell after minutes to the Federal Reserve's December policy meeting showed that most committee members expected the central bank's bond-buying programs would end by the end of 2013, perhaps even as soon as the middle of the year.

Of course, the Fed's actions will be dictated in large part by the outlook for the U.S. economy, but given the recent trend of strong data, traders are anticipating that the end of the various QE programs will come sooner rather than later.

Indeed, economic news flow continued to be positive this week. ISM said its gauge of nonmanufacturing activity in the U.S. rose from 54.7 to 56.1 in December—the highest level in 10 months. ISM’s manufacturing gauge rose from 49.5 to 50.7 in December, putting it back above the key 50 level.

Data on China’s manufacturing sector was also positive. HSBC's Manufacturing PMI for China rose from 50.5 to 51.5 in December—a 19-month high. The official government PMI held steady at 50.6.

Finally, the Bureau of Labor Statistics reported that U.S. employers added a solid 155K jobs in December, as expected. The unemployment rate was unchanged at 7.8 percent, also as expected.

Commodity Wrap