Commodities are set for the best annual performance since 2016, with crude to copper posting annual gains.

The Bloomberg Commodity Spot Index has hit the highest since November 2018 as trade tensions ebb, a risk-on mood sweeps markets, and the dollar eases. The gauge is now up 11% in 2019.

Commodities are benefiting from an end-of-year surge as the outlook for 2020 appears, at least at present, to be more promising than conditions that prevailed for much of this year. The U.S.-China phase-one pact -- expected to be formally concluded next month -- hinges on the Asian nation increasing purchases of farm goods. In addition, prospects for a deal have helped spur restocking by raw-materials users, according to Oversea-Chinese Banking Corp.

“Renewed optimism from the U.S.-China trade deal is driving demand expectations higher,” said Howie Lee, an economist at the Singapore-based lender. “Stockpiles are low going into 2020 and, with the expected pickup in demand, a lot of industry players find themselves short of inventories.”

Raw materials have also enjoyed a tailwind from a weaker U.S. currency, with the Bloomberg Dollar Spot Index retreating 1.8% this month to the lowest level since July. After three interest rate cuts this year, the U.S. Federal Reserve is expected to hold monetary policy steady over 2020.

Concerns among investors about the possibility of the onset of a U.S. recession -- which hurt commodities earlier this year -- have eased. This month, bond manager Jeffrey Gundlach said the odds of a recession by the end of next year have dropped to 35%. In September, he had predicted 75%.

Conditions in China, the top raw-material user, are picking up too. The nation’s economic performance improved in December for the first time in eight months, according to earliest-available indicators compiled by Bloomberg.

The advance in raw materials has been broad-based. Crude in New York has risen to the highest since September, with prices up 37% this year as the OPEC+ group of producers presses on with supply curbs.

In base metals, copper has surged far above $6,000 a ton as global stockpiles sink and the macro-economic outlook brightens. Wheat is trading at the highest since 2018 and soybeans are set for the biggest monthly advance since 2016.

There have been gains in precious metals too, including traditional haven gold, which has climbed in December even as the risk-on mood prevails and equity markets set records.

--With assistance from Krystal Chia.

This article was provided by Bloomberg News.