Commodities weekly: gains across all sectors in December

By Ole Hansen, Head of Commodity Strategy at Saxo

Ole Hansen

Commodities have so far yielded gains across all sectors this December, led by grains and energy. Despite several headwinds, the Bloomberg Commodity Total Return Index has delivered a year-to-date return of more than 5%.

As the holiday season and new year approach, market activity has begun to slow, with traders and investors adjusting positions—often downward—in anticipation of the quiet period. This strategy helps protect profits and avoid fresh losses as liquidity wanes, a condition that can amplify volatility in response to unexpected events.

In commodities, December has so far yielded gains across all sectors, led by grains and energy. Overall, the Bloomberg Commodity Total Return Index (BCOMTR), which tracks a basket of 24 major commodity futures spanning energy, metals, and agriculture, is currently up around 1% on the month, heading for an annual gain of around 5.5% – a solid return considering multiple headwinds throughout the year. These include a stronger USD, which has risen 6% against a basket of major currencies; lower grain prices due to another bumper crop production year; and concerns over China’s slowdown, impacting demand for energy and industrial metals.

Notably, cocoa, the year’s top performer, isn’t part of the index, and if we exclude natural gas, which has dropped by a third, BCOMTR’s return would exceed 9%. The difference between total return and futures price change, which may differ quite considerably, depends on the futures curve structure—a topic we’ll explore further.

Adverse weather has driven strong gains in cocoa, coffee, and orange juice. These soft commodities rely heavily on production in limited regions, making them vulnerable to weather events, such as those seen in Vietnam, West Africa, and Brazil this year.

Gold, meanwhile, continues to build on a record-breaking rally this year and is currently on track for an unprecedented eight consecutive December gains. Enjoying the tailwind from surging gold prices together with higher industrial metal prices, we have seen silver perform very strongly as well. Just like gold, it is currently up by more than 30% on the year, and while gold continued to reach fresh record highs, silver ‘only’ managed a twelve-year high at USD 34.9 per ounce, well below the 2011 record at USD 50 per ounce.