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Commodities and Precious Metals Report – Week Ending Nov. 9

Posted:
Topic: Gold , Commodities
Publication Type: Market Commentaries

Key points

  • Energy futures prices, except for natural gas and heating oil, once again decreased sharply last week.  WTI and Brent crude oil prices fell 4.6% and 3.6%, respectively, while gasoline prices fell 5.4%.  Heating oil prices were practically unchanged, declining 0.2%.  Natural gas prices soared, gaining 12.4%.
  • Base metal prices were all lower last week.  Copper and nickel prices decreased the most, falling 4.4% and 3.9%, respectively. Aluminum and zinc prices decreased 1.1% and 0.9%, respectively.
  • Grain prices also moved lower last week.  Chicago and Kansas wheat prices fell 1.3% and 3.3%, respectively.  Corn and soybean prices declined 0.4% and 0.1%, respectively.
  • Gold, silver and platinum prices were all lower last week.  Gold prices fell 1.7%, silver prices dropped 4.2% and platinum prices decreased 0.9%.
  • Sugar and coffee prices lost ground last week with both falling about 5.2%.
  • The Bloomberg Commodity Index outperformed the S&P GSCI last week.  The Bloomberg Commodity Index decreased 1.14% while the S&P GSCI fell 2.52%.  The Bloomberg Commodity Index’s lower energy exposure but higher natural gas exposure was primarily responsible for its outperformance.
  • Total assets in commodity ETPs decreased $204.2m. Gold             (-$94.9m), broad commodity (-$142.8m) and silver (-$24.6m) ETP outflows were offset primarily by crude oil ($70.0m) ETP inflows.

Commentary

Initially weakening on the back U.S mid-term election results, the U.S. dollar moved higher on Thursday and Friday with a stronger-than-expected PPI report on Friday and an FOMC statement – coming at the end of a 2-day meeting on Thursday– indicating the Federal Reserve Bank would continue with its tightening policy. Increasing concerns over global economic growth in general and with Chinese economic growth in particular also helped strengthen the U.S. Dollar and at the same time pressured commodity prices lower.  The U.S dollar, down 0.6% through Wednesday, finished the week 0.4% higher, the S&P 500 Index, up 3.3% through Wednesday, finished the week up 2.1% and 10-year U.S Treasury rates fell 3bps 2.18%.

Crude oil prices moved lower again last week over continued concerns of weaker global economic growth, especially in China, and continued high oil production in the U.S., Saudi Arabia and Russia.   Wednesday’s EIA petroleum status report and Friday’s Baker-Hughes rig count report also contributed to lower oil prices, with the EIA reports showing increasing inventory levels and the Baker-Hughes report registering an increase of 12 oil rigs.    Natural gas prices were powered higher on the back of historically low inventory levels and forecasts of frigid weather for a good portion of the U.S over the next week.  Heating oil prices also benefited from cold weather forecasts.

Base metal prices fell on the strength of the U.S. dollar and over increased concerns of global and Chinese economic weakness.

Gold prices moved lower as the U.S. dollar strengthened and as the U.S. Federal Reserve Bank indicated it would continue its stable and consistent monetary policy.  Silver and platinum prices moved lower with base metal prices. 

Corn and wheat prices moved lower as the USDA revised higher U.S. and global stockpile forecasts.  Soybean prices, lower through Thursday, were supported by increased expectations of a trade deal with China.

Coffee prices moved lower over increased supply concerns and on the strength of the U.S. dollar.  Sugar prices moved lower mainly on the back of a stronger dollar.

Coming up this week      

  • Light data week withFederal Reserve Bank Chairman Jerome Powell speaking on Wednesday.
  • CPIon Wednesday followed by Jerome Powell Wednesday evening.
  • Joblessclaims, Philadelphia Fed business outlook survey and retail sales on Thursday.
  • Industrialproduction on Friday.
  • EIAPetroleum Report on Thursday 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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