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Commodities and Precious Metals Report – Week Ending Jan. 4

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Publication Type: Market Commentaries
Commodities and Precious Metals Report – Week Ending Jan. 4

Key points 

 

  • With the exception of natural gas, it was a good week for the energy sector. WTI and Brent crude oil prices jumped 5.9% and 7.2%. Heating oil prices increased a 6.7% and gasoline prices rose 4.0%.  Natural gas prices dropped 7.7%.
  • Base metal prices posted mixed performances last week.  Aluminum and nickel prices rose, with aluminum prices increasing 1.5% and nickel prices climbing 3.5%.  Copper prices ended the week down 1.3% while zinc prices were practically unchanged.
  • It was a good week for the grain sector as well.  Chicago and Kansas wheat prices increased 1.1% and 1.0%, respectively, corn prices increased 2.0% and soybean prices rose 2.9%.
  • Gold, silver and platinum prices also posted positive performances with gold prices up about 0.2%, silver prices up 0.4% and platinum prices up 1.5%.
  • Mainly propelled by strong energy sector performance, the S&P GSCI strongly outperformed the Bloomberg Commodity Index last week with the S&P GSCI up 3.19% versus up 1.01% for the Bloomberg Commodity Index.
  • Total assets in commodity ETPs increased $703.3m. Gold ($643.7m), broad commodity ($38.6m) and precious metals (ex-gold and silver) ($21.8m) ETP inflows were primarily responsible for the increase.

Commentary

Another volatile week for U.S. equity markets with fluctuating concerns over weak China and U.S growth primarily responsible for setting the tone.  On the back of comments from President Trump announcing substantial progress in China trade talks, the S&P 500 Index increased just under 1% through Wednesday only to fall 2.5% on Thursday after a much-weaker-than-expected ISM manufacturing index report while Friday’s much-stronger-than-expected employment report propelled the S&P 500 index 3.4%.  For the week, the S&P 500 Index gained 1.85%, the U.S. dollar (as measured by the DXY index) weakened 0.23% and 10-year U.S. Treasury rates fell 5.6bps to 2.66%.

A volatile week for oil prices as well, though all on the upside.  Reports of reduced Saudi exports to the U.S. and bigger production cutbacks dues to concerns of weaker global growth drove oil prices 2.5% higher through Wednesday and 1.1% higher on Thursday.  Friday’s much-stronger-than-expected employment report reduced weak-demand concerns, pushing WTI crude prices up 1.9%.   Natural gas continued its decline on warmer-than-expected weather, falling almost 8% on the week.

Gold prices, up almost 1% through Thursday, ended the week almost unchanged after a much-stronger-than-expected employment report increased uncertainty about the weakness of the U.S. economy and about the Federal Reserve Bank’s monetary policy this year and next.  Silver and platinum prices moved with base metal prices.

A weaker dollar, reports of significant trade talk progress with China and a much-stronger-than-expected employment report on Friday helped support base metal prices.  Base metal prices, all lower through Thursday, increased strongly after Friday’s unemployment report. Copper prices, for example, down 4.2% through Thursday rallied 3.1% after the employment report on Friday.

Grain prices were supported by increased expectations of corn and soybean exports and a weaker U.S. dollar.   Wheat prices benefited from not only a weaker U.S dollar but also from reduced Russian exports and weather related harvest problems in Argentina.

Coming up this week      

  • CPI numbers and FOMC minutes highlight this data week.
  • Factory orders and ISM non-manufacturing index on Monday.
  • International trade on Tuesday.
  • FOMC minutes released Wednesday and CPI report on Friday.
  • EIA Petroleum Report on Wednesday and Baker-Hughes Rig Count on Friday.

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.

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