A year after Citigroup Inc. declared the decade-long run of commodity gains over, wacky weather, dead piglets and Vladimir Putin have gotten in the way.
While Citigroup rang “death bells” in April 2013 for the synchronized super cycle fueled by economic growth in China, extreme weather and supply squeezes led to surprise rallies in 2014’s first three months. Coffee hit a two-year high, cattle and hogs rose to records and nickel had its best quarter since 2010. Gold rebounded from the worst rout in 32 years after Putin’s incursion into Ukraine’s Crimea region set off the biggest standoff between Russia and the U.S. since the Cold War.
Commodities are “still a powerful hedge,” Rob Haworth, a Seattle-based senior investment strategist at U.S. Bank Wealth Management, which oversees $115 billion, said in a telephone interview. “Things happen that we don’t anticipate, whether it’s an invasion in Ukraine or twice as much snow in the middle of America as we normally get. Our clients benefit from having a little exposure to protect against the unanticipated.”
Commodities topped returns for stocks, bonds and currencies, the first quarterly outperformance against all asset classes since 2012. New York-based Citigroup and Goldman Sachs Group Inc. say the rally won’t last as supply surpluses start to emerge in everything from sugar to zinc. Investors who poured $1.55 billion into gold funds this year pulled a net $66 million from all raw materials, including base metals and energy, EPFR Global data show.