An eye on the futures

12/23/20
  • Financial futures are the most actively traded futures markets
  • But some of 2020’s biggest moves occurred in commodity futures
  • Traders may find interesting moves outside oil and gold, though

If this year was a reminder about anything in the futures markets, it’s that traders should read past the headlines.

It can’t be said enough that futures are less of an asset class than a collection of distinct markets with unique catalysts—and trends can emerge when you least expect them.

Some of this year’s biggest futures moves occurred outside the best-known markets.

Most traders probably know that gold hit record highs above $2,000/ounce in August, and that crude oil futures briefly traded in negative territory at the worst point during the spring COVID panic. But they may not know:

●From March 23 to December 15, copper futures (HGG1) rallied more than 60%—nearly three times as much as gold futures (GC) over the same period, and 50% more than gold’s maximum gain when it hit its all-time high in early September. To top things off, silver and platinum gained even more than copper.

Lumber was the biggest commodity mover of the year. Rallying alongside a scorching housing market, March lumber (LBSH1) gained 91% between June 26 and December 12. But along the way it fell 40% from August to October before embarking on a 78% rally to its December high.

●This month the US dollar extended its most significant down move since 2017. If this trend continues, it could have important implications not just for dollar index futures (DX), but every currency trading against the dollar, most notably Euro FX futures (6E), which broke out of a four-month trading range in December.

In other words, there’s a lot more to futures than stock indexes and Treasuries, even if those are the highest-volume markets. And there’s more to commodities than oil and gold.

 

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