London, 2 July 2011

The 2011 commodity story continued to be about higher energy prices and their subsequent economic impact, as represented by the 33.28% 12-month increase in the spot S&P GSCI Energy Index.

The S&P GSCI declined 5.31% in June, and 7.94% in the second quarter (Q2). Index pressure in Q2 was led by weakness in the energy and agriculture sectors. Year-to-date (YTD), the S&P GSCI ended the first half (H1) of 2011 with a cumulative gain of 2.71%, led by the energy and precious metals sectors and supported by underlying weakness in the U.S. dollar -- as measured by the 5.86% H1 decline in the U.S. Dollar Index.

In Q1, the S&P GSCI increased 11.56% on the back of strength in energy, due to increasing global demand and supply disruptions in the Middle East and North Africa. However, demand destruction and risk reduction in Q2 -- partially, due to spiking energy prices -- tempered overall first-half S&P GSCI returns.

Prospects of ”bringing-on-supply” in agriculture led the S&P GSCI Agriculture Index to an index-loss-leading 12.09% decline in Q2. The economy-sensitive S&P GSCI Energy Index was also pressured with a Q2 decline of 7.87%, lessening the year-to-date increase to 6.30%. Reflecting the dominance of energy in the 2011 commodity market, the S&P GSCI Non-Energy Index ended H1 with a decline of 4.57%.

The precious metals sector was the only other major S&P GSCI sector to post a positive return in Q2, as every remaining sector in the S&P GSCI declined.

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