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Research

Commodities and Precious Metals Update (Week ending July 5)

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

Key points

  • Most energy prices ended lower last week.  WTI and Brent crude oil prices decreased 1.6% and 0.8%, respectively, heating oil prices fell 1.9% and gasoil prices lost 3.0%. Natural gas prices rose, increasing 4.7% and gasoline prices gained 1.1%.
  • Soybean and wheat prices fell last week while corn prices increased. Chicago and Kansas wheat prices decreased 2.3% and 3.5%, respectively, and soybean prices decreased 3.1%. Corn prices increased 3.3%.
  • Except for aluminum, base metal prices were all lower last week. Zinc prices decreased the most, falling 2.7%, followed by copper prices, down 1.9% and then nickel prices, down 1.7%.  Aluminum prices were unchanged on the week.
  • Gold and silver prices moved lower last week while platinum prices rose. Gold prices decreased 1.4% and silver prices fell 2.2%.  Platinum prices increased 0.9%.
  • The S&P GSCI slightly underperformed the Bloomberg Commodity Index last week with the S&P GSCI decreasing 0.67% versus the Bloomberg Commodity Index decreasing 0.63%. Once again, the S&P GSCI’s smaller exposer to natural gas was the primary reason for its underperformance.
  • Total assets in commodity ETPs increased $320.7m last week. Gold ($149.6m), silver ($80.5m), crude oil ($41.0m) and broad commodity ($39.0m), ETP inflows were primarily responsible for the increase.

Commentary

Increased optimism on Monday resulting from a reported U.S.-China trade truce following the G-20 conference followed by a stronger-than-expected employment report on Friday moved U.S. stock markets higher, strengthened the U.S. dollar and increased the 10-year U.S. Treasury rate.  However, weak economic data from Europe and China as well and a mix of better-than- and worse-than-expected U.S. economic data during the week,  pushed the U.S. 10-year Treasury rate lower  to 1.95% (on Wednesday) and the held the U.S. dollar steady. Friday’s stronger-than-expected employment report further strengthened the U.S. dollar by 0.5% and moved  10-year U.S. Treasury rates 8bps higher. At week’s end the S&P 500 Index was up 1.7%, the U.S. dollar strengthened 1.2% and the 10-year U.S. Treasury rate increased 3bps to 2.03%.

WTI crude oil prices, initially supported by OPEC+ announcing the extension of production cutbacks into 2020 and by optimism surrounding reduced trade frictions between the U.S. and China,  increased a little over 1% on Monday only to fall almost 5% on Tuesday after much-weaker-than-expected economic reports from both China and the EU. Wednesday’s bigger-than-expected U.S. oil inventory drawdown and Friday’s stronger-than-expected employment report helped push prices off their lows the remainder of the week.

Base metal prices moved lower throughout the week hurt by weak economic reports in both the EU and China as well as by a strengthening U.S. dollar. Zinc prices also suffered from expectations of increased supply.

Gold prices up 0.5% through Thursday over concerns of global and U.S economic growth, fell 1.4% on Friday after a stronger-than-expected employment report.

Improved weather and higher-than-expected harvest yields pushed both wheat and soybean prices lower last week. Corn prices, up on the week, retraced some of the prior week’s losses, supported by uncertainty over harvest yields.

Coming up this week      

  • U.S. Federal Reserve Bank Chairman Jerome Powell testimony to the House and Senate on Wednesday and Thursday.
  • FOMC minutes from last meeting released Wednesday afternoon.
  • CPI on Thursday followed by PPI on Friday.
  • Jobless claims on Thursday.
  • 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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