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The Global Resources Fund (PSPFX) lost 3.74 percent in January as the broader market gave back some of last year’s gains. Fund performance trailed that of its benchmark, the Morgan Stanley Commodity Related Index, which also lost 2.16 percent. See complete fund performance here.
- Gold stocks made a comeback to begin the new year. The NYSE Arca Gold Miners Index jumped 10.8 percent in January, as gold futures gained 3.7 percent to $1,244 per ounce. Base metals and related mining stocks rebounded in the period with the S&P/TSX Capped Diversified Metals and Mining Index up 0.6 percent.
- Crude oil and refined product stocks outperformed our natural resources universe with a 13.9 percent gain, as supply and demand fundamentals reached a price inflection point after a period of oversupply.
- Construction materials contributed to positive performance following improving non-residential construction data, as well as hints of potential merger and acquisitions, which improved sentiment for the group.
- Iron, steel and dry freight shipping stocks all underperformed in the period after a strong run in Chinese iron ore restocking and the Baltic Dry shipping rate during the prior quarter. Much of the slowdown within bulk commodities was deemed to be seasonal with the onset of the Chinese New Year holiday.
- Despite record low temperatures in January, coal equities lagged their natural gas counterparts as supply disruptions in prior years were kept in check so far this year.
- Oil and gas offshore drilling stocks fell 7 percent in the month on disappointing earnings reports and slow contract renewals.
- Through most of this decade, non-Organization of Economic Cooperation and Development (OECD) demand growth has been a key driver for oil market balances, but what makes this year different is that the growth is poised to come from a diverse pool of countries rather than a few big sources that have been major contributors in the past, such as China and India.
- China needs to invest more in overseas mining projects in order to improve its pricing power, according to the National Development and Reform Commission, adding that Chinese iron ore imports would continue to rise and the country would remain dependent on imports.
- Indonesia plans to issue export quotas for processed minerals and concentrates soon, according to mining ministry officials, as the government seeks to take greater control over shipments of its natural resources. Separately, the Mineral Entrepreneurs Association has filed a legal challenge against the ore export ban while Freeport and Newmont have yet to resume exports of unrefined ores since the introduction of the new export tax.
- Headwinds from the Federal Reserve tapering, along with recent weak oil demand data, suggest that there may be downside risks for oil demand heading into the year.
- South Africa’s Association of Mineworkers and Construction Union (AMCU) rejected a wage offer from platinum producers, presented after four days of government-brokered talks. The union has been seeking doubling of wages for its workers at the three largest platinum producers globally, together accounting for more than 40 percent of global mine supply.
Past performance does not guarantee future results.
The Morgan Stanley Commodity Related Index (CRX) is an equal-dollar weighted index of 20 stocks involved in commodity related industries such as energy, non-ferrous metals, agriculture, and forest products. The index was developed with a base value of 200 as of March 15, 1996. The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver. The index benchmark value was 500.0 at the close of trading on December 20, 2002. S&P/TSX Capped Diversified Metals and Mining Index is an index of companies engaged in diversified production or extraction of metals and minerals.
Holdings in the Global Resources Fund as a percentage of net assets as of 12/31/2013: Freeport McMoRan Copper & Gold Inc 2.73%, Newmont Mining Corp 0.00%.