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Commodities and Precious Metals Update (Week ending February 14, 2020)

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

Key points 

Except for natural gas, energy prices were all higher last week.  WTI and Brent crude oil prices increased 3.5% and 4.4%, respectively.   Gasoil and heating oil prices rose 1.5% and 3.1%, respectively and gasoline prices increased 2.8%.  Natural gas prices fell 2.4%.

Wheat and corn prices fell last week while soybean prices increased.  Chicago and Kansas wheat prices decreased 2.7% and 1.3% respectively and corn prices fell 1.7%. Soybean prices increased 0.9%.

Except for aluminum prices, base metal prices were all higher last week.  Copper prices rose 1.8%, nickel prices gained 1.9% and zinc prices edged 0.2% higher.  Aluminum prices decreased 0.3%.

Coffee prices surged 10.8%.

Precious metal prices all moved higher last week.  Gold prices rose 0.6%, silver prices rose 0.2% and platinum prices increased 0.1%.

The Bloomberg Commodity Index increased 0.87% last week. The energy sector provided most of the week’s gains followed by the softs sector (mainly coffee) and the base and precious metals sectors.  The grains sector detracted from Index performance.

Total assets in commodity ETPs increased $834.7m last week with gold and broad commodity ETPs responsible for most of the inflows. Gold ($626.8m), broad commodity ($160.0m) and crude oil ($30.9m) ETP inflows were only slightly offset by other ETP outflows.

Commentary

Amid reduced concern surrounding the coronavirus and supportive statements by Fed Chairman Jerome Powell regarding the strength of the U.S. economy and that the Fed was monitoring the possible effects of the coronavirus, U.S. stock markets moved higher once again last week.  Reports on Tuesday the FTC would be investigating tech companies and China’s restatement higher of the number of coronavirus cases on Thursday, only momentarily moved U.S. stock markets lower with the FTC clarifying it was not investigating but only opening a study and as the WHO made clear China’s restatement did not represent a surge in the growth of new coronavirus cases.   And despite weaker-than-expected industrial production numbers and so-so retails sales numbers on Friday, U.S. stock markets closed at all time highs on Friday.    At week’s end the S&P 500 Index increased 1.6% closing at 3380.16, the 10-year U.S Treasury rate was unchanged at 1.58% and the U.S. dollar strengthened 0.5% (as measured by the DXY Index).

Down 1.5% on Monday over indications OPEC+ would not have an emergency meeting to discuss increased production cutbacks in the face of the coronavirus, WTI crude oil prices rallied the rest of the week on reduced concerns of the effect of the coronavirus on oil demand.  WTI crude oil prices increased over 2% on Wednesday and Friday on the back of news that the rate of new coronavirus cases was unchanged or slowing and on reports on Friday that Chinese oil refineries had purchased oil.

Base metal prices moved higher with reduced concerns regarding the extent and effect of the coronavirus, though prices moved off the week’s highs on Friday.   Aluminum prices, higher through Thursday, fell on oversupply concerns.

After initially falling early in the week as coronavirus concerns eased, uncertainty surrounding the coronavirus numbers reported from China helped pushed gold prices higher.   Platinum and silver prices also benefited from higher base metal prices.

Corn and wheat prices moved lower on global oversupply concerns.  Soybean prices, lower through Thursday, moved higher for the week on Friday with expectations of Chinese purchases as the Phase One agreement officially began this past weekend.   

Coffee prices rallied on increased concerns of lack of supply.

Coming up this week      

  • Relatively busy holiday-shortened data week highlighted by PPI on Wednesday and housing data throughout the week.
  • Housing market index on Tuesday.
  • Housing starts and PPI on Wednesday.
  • Jobless claims, Philadelphia Fed business outlook survey on Thursday.
  • PMI composite flash and existing home sales on Friday.
  • EIA petroleum 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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