Commodities & Precious Metals Weekly Report: Dec 20
Posted:Key points
Energy prices all moved higher last week. WTI and Brent crude oil prices increased 1.0% and 1.5%, respectively. Gasoil and heating oil prices rose 2.9% and 1.8%, respectively and gasoline prices increased 2.3%. Natural gas prices increased 0.5%.
Grain prices, too, were all higher last week. Chicago wheat prices rose 1.8% while Kansas wheat prices increased 4.4%. Corn and soybean prices rose 1.8%.
Following the trend, base metal prices all moved higher last week as well. Zinc prices increased the most, rising 4.1%, followed by nickel prices which increased 2.5%. Aluminum prices increased 1.9% and copper prices gained 0.9%.
Precious metal prices, too, were all higher. Gold prices rose 0.9%, silver prices increased 1.3% and platinum prices gained 0.3%.
The Bloomberg Commodity Index rose once again last week, increasing 1.26%. Like last week, all sectors contributed to the increase with the agriculture, energy and base metal sectors accounting for almost all the increase.
Total assets in commodity ETPs decreased $79.5m last week. Gold (-$84.9m) and silver (-$12.7m) ETP outflows were partially offset by agriculture ($10.3m) and energy (ex-crude oil) ($15.9m) ETP inflows.
Commentary
Stronger-than-expected Chinese factory production and consumer spending numbers combined with support from last week’s announcement of a U.S.-China phase one trade agreement and congress passing the USMCA pushed the S&P 500 Index to another record high and moved 10-year U.S. Treasury interest rates 5bps higher to 1.88% through Tuesday. Stronger-than-expected U.S. economic reports, including strong factory production and new housing starts, pushed 10-year U.S. interest rates 3bps higher to 1.92% and kept the S&P 500 Index at near record levels through Wednesday. Stronger-than-expected new homes sales on Thursday and consumer spending reports on Friday along with Trump administration statements the U.S.-China phase one trade agreement would be signed next month, pushed the S&P 500 index to new highs with 10-year U.S. Treasury rates remaining at 1.92%. At week’s end the S&P 500 Index increased 1.7% to 3,221.22, 10-year U.S. interest rates increased 10bp to 1.92% and the U.S. dollar (as measured by the DXY index) strengthened 0.5%.
WTI oil prices, buoyed by increased demand expectations due to reduced trade frictions between the U.S and China as well as the passage of the USMCA, increased just over 2% through Thursday. Friday’s Baker-Hughes rig report showing operating U.S. rigs increased by 18 pushed WTI crude prices down by a little over 1% from Thursday’s high.
Buoyed by stronger-than-expected economic data from both China and the U.S. and supported by reduced trade frictions between the U.S and China, base metal prices moved higher despite a stronger U.S. dollar.
Gold, silver and platinum prices rose despite a stronger U.S. dollar and reduced trade U.S.-China trade frictions. Precious metals continue to be supported by low U.S. inflation and the U.S. Federal Reserve Bank’s hold on the Fed Funds Target Rate.
Grain prices moved higher on the back of reports that Chinese purchases of $40 billion of U.S. agricultural products are attainable as well as statements by the Trump administration the phase one agreement will be formally signed next month.
Coming up this week
- Very light holiday-shortened data week.
- Durable goods order and new home sales on Monday.
- Jobless claims on Thursday.
- EIA petroleum report and Baker-Hughes rig count on Friday.
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.
