A distinct slowdown in global economic growth and continuing uncertainty relating to fiscal deficit, sovereign debt, liquidity status, interest rates and volatile currency markets characterised the year that has come to an end.

Global commodity markets were no doubt subjected to the influences of most of these factors. In particular, commodities with strong correlation with growth or growth-led commodities performed modestly. Slowing growth in general led to a cautious approach by investors who resorted to risk reduction through winding down of speculative long positions.

The kind of price performance many commodities witnessed in recent years was distinctly absent this year. Tin may be the only exception. The base metal gained by about 10 per cent over the year to end at $23,304 a tonne LME cash on Friday.

Despite intra-year volatility, gold and silver failed to capitalise on supportive macro environment with the yellow metal ending the year at $1,658 an ounce and silver at $30.15/oz in London.

The crude oil markets have also been somewhat sober for several months with sideways trading the norm. Iron ore prices dropped by as much as a quarter during the year; yet, the sea-borne iron ore trade expanded by a modest 20 million tonnes, the lowest growth since 2002, according to experts.

This clearly reflected softening demand from steelmakers. Yet, iron ore prices have been rallying in recent weeks.

In December alone, the rates have escalated by a fifth. 62 per cent Fe fines are currently traded up to $139 a tonne, the highest price since May this year.

As for agriculture, weather played a big role in catapulting corn and soyabean prices to new highs.

A massive drought in the US Midwest followed dry conditions in South America resulting in tight supplies even as demand for the produce showed limited weakness.

At the end of the year, the level of uncertainty is no less than it was at the beginning what with the US fiscal cliff hanging like Damocles sword, and a just resolution of the European sovereign debt issue nowhere in sight.

The role of geopolitics can never be underestimated. Yet, there is growing evidence that growth signals are just beginning to flicker slightly brighter in major economies such as the US and China.

If the world returns to normal weather, there is near-certainty that global agricultural production will rebound in 2013 and prices will turn distinctly soft.

Gold subdued

The yellow metal had a subdued week with holidays and limited trading interest. On Friday, in London gold PM Fix was $1,658/oz as compared with $1,656 the previous day and $1,663 on December 24. The price movement was attributed to year-end profit taking. Silver AM Fix on Friday was $30.15/oz up from the previous day’s $29.75, but down from Monday’s $30.19.

During the year, gold continued to trade at a premium over platinum. Platinum ended the year at $1,527/oz and palladium at $704/oz.

In 2012, despite supportive macro backdrop, the price performance of the yellow metal fell much below expectations that were raised during the year under some pretext or the other.

Investor interest has remained subdued. Physical demand has slowed because local currency prices in major markets such as India recorded new highs.

In the New Year, if the equity markets begin to perform well, gold runs the risk of further long liquidation and downward correction in the coming months. At the same time, continued central bank buying and robust ETP holdings are constructive for gold prices that are looking for triggers to move up.

Metals drift

The complex has ended the year on a subdued note, having been buffeted by macroeconomic uncertainties during the last 12 months. Slowdown in global growth impacted demand and prices.

Widely recognised as the mover and shaker of global metals market, China’s import demand for many metals slowed in the wake of growing inventory.

Given weak fundamentals, aluminium prices are expected to remain rather soft. On the other hand, lead fundamentals look constructive given the rising demand for lead batteries from the automotive sector.

On Friday, cash LME prices were as under: aluminium $2,931/tonne; copper $7,867; lead $2,318; zinc $2,022, nickel $17,141 and tin $23,325.

Crude: Positive outlook

The market has had a long march sideways to lower because of growth concerns. The fundamentals are seen constructive.

Many are betting on geopolitical instabilities to provide a trigger for an upward price movement.

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