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Commodities and Precious Metals Update (Week Ending Feb. 22)

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

Key points 

  • The base metals sector was the best performing last week with all components ending higher. Copper prices, up the most, gained 5.2%, followed by nickel, up 4.8%. Zinc and aluminum prices increased 2.9%.
  • The energy sector was the second-best performing sector last week with all components ending higher as well. WTI and Brent crude prices increased 2.3% and 1.6%, respectively, while gasoil, gasoline and heating oil prices rose 1.2%, 1.7% and 0.8%. Natural gas prices increased 2.9%.
  • Wheat prices were lower last week while corn and soybean prices had small increases. Wheat prices fell between 3.0% (Chicago wheat) and 3.8% (Kansas wheat). Soybean prices were up 0.2% and corn prices increased 0.5%.
  • Gold, silver and platinum prices finished higher last week. Gold prices increased 1.0% and silver prices increased 1.1%.   Platinum prices jumped 5.3% higher.
  • The S&P GSCI and the Bloomberg Commodity Index performed almost identically with the Bloomberg Commodity Index increasing 1.49% and the S&P GSCI increasing 1.47%. The Bloomberg Commodity Index’s larger exposure to base and precious metals and natural gas help offset its smaller exposure to energy.
  • Total assets in commodity ETPs decreased again last week, falling $220.7m. Gold (-$86.7m), crude oil (-$62.9m), broad commodity (-$85.3m) and energy (ex-crude oil)  (-$20.7m) ETP outflows were offset slightly mainly by silver ($32.5m) ETP inflows.

Commentary

Increasing expectations of a U.S.-China trade agreement and growing conviction the U.S. Federal Reserve Bank won’t raise rates this year helped move commodity and stock markets higher last week.  FOMC minutes from the most recent FOMC meeting released on Wednesday showed the committee was concerned about weaker growth in the U.S., U.S.-China trade tensions and current tight financial conditions with expectations of continued low to moderate inflation.    The S&P 500 Index finished the week 0.6% higher while the U.S. dollar (as measured by the DXY Index) weakened 0.4%.   10-year U.S Treasury rates decreased 1bp to 2.65%.

Oil prices benefited from increasing optimism over a U.S-China trade agreement, OPEC+ determination to deliver promised cutbacks and Saudi Arabia’s pledge to cut even further as well as record low Venezuelan exports.  Though the EIA’s petroleum report showed oil inventories increased more than expected, overall product supply fell more than expected, supporting oil prices.  In addition, the Baker-Hughes rig count showed a decline of 4 rigs from the previous week.

A weaker U.S. dollar and increasing optimism surrounding a U.S. China trade agreement helped push base metal prices higher.  Copper and nickel supply shortage concerns also supported copper and nickel prices, lifting copper prices to a seven-month high and nickel to a two-week high.

Gold prices were buoyed by a weaker U.S. dollar pressured by increasing expectations the U.S. Federal Reserve Bank will not raise rates this year and increasing optimism over a U.S.-China trade agreement.  Platinum prices jumped 5.3% last week, moving higher with base metals.

Wheat prices continued to move lower on forecasts of greater-than-expected global supply while corn and soybean prices were supported by reports China would be increasing purchases.

Coming up this week      

   

  • Busy data week accentuated by Fed Chairman Powell’s semi-annual monetary report before congress on Tuesday and Wednesday.
  • Consumer confidence and housing starts on Tuesday.
  • International trade in goods on Wednesday.
  • Jobless claims and Q4 GDP second estimate on Thursday.
  • EIA Petroleum Report on Wednesday and Baker-Hughes Rig Count on Friday.

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