Commodities and Precious Metals Report – Week Ending Dec. 7
Posted:Key points
- Energy prices were all higher last week with the exception of natural gas. WTI and Brent crude oil prices increased 3.3% and 3.8%, respectively, and gasoline and heating oil prices increased 6.0%and 3.1%, respectively. Natural gas prices fell 2.7%.
- Base metal prices were lower last week with the exception of zinc prices. Aluminum, copper and nickel prices fell 0.6%,1.0% and 2.7%, respectively. Zincprices increased 1.6%.
- Grain prices were all higher again last week. Chicago and Kansas wheat prices increased 3.0% and 2.4%, respectively, while corn and soybean prices increased 2.1% and 2.5%, respectively.
- Gold prices finished the week up 2.2%. Silver prices, too, increased, finishing the week up 3.4%. Platinum prices declined 2.0%.
- The S&P GSCI outperformed Bloomberg Commodity Index last week. The S&P GSCI increased 2.42% while the Bloomberg Commodity Index increased 1.17%. The S&P GSCI’s larger energy exposure was primarily responsible for its outperformance.
- Total assets in commodity ETPs fell $80.1m. Gold (-$56.7m), silver (-$40.7m), agriculture(-$35.0m) ETP outflows were offset by crude oil ($60.1m) ETP inflows.
Commentary
Receding expectations of improved trade relations between the U.S and China combined with concerns of weaker economic growth in the U.S. moved the U.S dollar, U.S stock markets and U.S. treasury rates lower last week. The arrest of Huawei’s CFO in Canada and Trump administration statements and tweets diminished expectations of a trade deal with China while a weaker-than-expected employment report increased uncertainty about U.S.economic growth. At week’s end the S&P 500 Index was down 4.6%, the U.S dollar weakened 0.7% and 10-year U.S Treasury rates fell 13 basis point to 2.85%.
A volatile week for crude oil prices as conflicting announcements and reports before and during the OPEC+ meeting market expectations back and forth and moved oil prices accordingly. WTI crude oil prices, for example, were up as much as 4.5% and as little as 1% during the week, before finishing up a little over 3%. The EIA reported oil inventories fell 7.3 million barrels, the first decline in 11 weeks, while the Baker Hughes reported active rigs in the U.S fell by 10.
Up through Wednesday of last week on the back of a weaker U.S dollar brought about expectations of improved trade relations between the U.S and China, base metal prices suffered from a flare up in tensions between the U.S. and China after the arrest of the CFO of Huawei in Canada. Zinc prices continued to benefit from supply concerns.
Gold and silver prices moved higher as U.S. stock markets moved lower and expectation increased of a reduced number of rate hikes in 2019 by the U.S. Federal Reserve Bank. Platinum prices followed base metal prices lower, affected by concerns of weakness in the automobile industry.
Down through Thursday of last week,wheat prices jumped on Friday on the back of greater-than-expected U.S. wheat exports and decreased supply from the Black Sea area. Soybean and corn prices also benefited from greater-than-expected exports, with prices increasing about 0.75% on Friday.
Coming up this week
- Another light data week, spearheaded by inflation reports on Tuesday and Wednesday.
- PPI on Tuesday and CPI on Wednesday.
- Jobless claims on Thursday.
- Retail sales and industrial production on Friday.
- EIA Petroleum Report on Wednesday and Baker-Hughes Rig Count on Friday.
Important Information
Past performance is no guarantee of future results.
Investing in physical commodities, including through commodity-linked derivative instruments such as Commodity Futures, Commodity Swaps, as well as other commodity-linked instruments, is speculative and can be extremely volatile, and may not be suitable for all investors. Market prices of commodities may fluctuate rapidly based on numerous factors, including: changes in supply and demand relationships (whether actual, perceived, anticipated, unanticipated or unrealized); weather; agriculture; trade; domestic and foreign political and economic events and policies; diseases; pestilence; technological developments; currency exchange rate fluctuations; and monetary and other governmental policies, action and inaction.
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Who is Jeff Klearman in our research team? Jeff has over 20 years experience working as a trader, structurer, marketer and researcher. Most recently, Jeff was the Chief Investment Officer for Rich Investment Services, a company which created, listed and managed ETFs. Prior to Rich Investment Services, Jeff headed the New York Commodities Structuring desk at Deutsche Bank AG. From 2004 to 2007, he headed the marketing and structuring effort for rates based structured products at BNP Paribas in New York. He worked at AIG Financial Products from 1994 to 2004 trading rates-based volatility products as well as marketing and structuring. Jeff received his MBA in Finance from NYU Stern School of Business and his Bachelors of Science in Chemical Engineering from Purdue University.
