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Research

Commodities and Precious Metals Update (Week ending November 29, 2019)

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

Key points

Energy prices were all lower last week with natural gas prices down the most.  WTI and Brent crude decreased 4.5% and 2.9%, respectively.  Gasoil, gasoline and heating oil prices fell 1.7%, 4.7% and 2.6%, respectively.  Natural gas prices plummeted 15.8%.

Grain prices were mixed again last week. Chicago wheat prices increased 4.4%, Kansas wheat prices increased 3.2% and corn prices rose 0.7%. Soybean prices fell 2.3%.

Gold, platinum and silver prices were all lower last week.  Gold prices declined 0.3%, platinum prices decreased 0.8% and silver prices fell 0.2%.

Base metal prices were mixed as well last week.  Aluminum prices gained 1.8% and copper prices edged higher, increasing 0.1%.   Zinc prices fell 1.5% while nickel prices dropped 6.7%.

The Bloomberg Commodity Index decreased 2.02% last week primarily as a result of lower energy prices, particularly lower natural gas prices and as result of lower base metal prices.

Total assets in commodity ETPs rose $311.7m last week primarily as a result of gold ETP inflows. Gold ($265.4m), broad commodity ($18.8m), agriculture ($14.2m) and precious metal (ex-gold and silver) ($13.0m) ETP inflows were slightly offset by crude oil (-$10.5m) ETP outflows.

Commentary

Supported by indications of progress on a U.S.-China trade agreement and strong U.S. economic reports (including new home sales and 2nd estimate Q3 GDP),  the S&P 500 Index moved 1.4% higher through Wednesday to close at 3153.63, another all-time high.  President Trump’s signing of legislation supporting Hong Kong protesters along with falling energy prices pushed U.S. stock markets slightly lower with the S&P 500 Index slipping 0.4%.    At week’s end the S&P 500 Index was up 1% to 3140.98, 10-year U.S. Treasury rates gained 1bp to 1.78% and the U.S. dollar was unchanged (as measured by the DXY index).

Down only slightly despite a much-larger-than-expected increase in U.S. inventories and record U.S oil production (as reported on Wednesday), WTI crude oil prices dropped 5% on Friday on increased concerns of an oversupplied market.   Russian statements expressing a desire to wait until April 2020 to discuss continued production cutbacks increased uncertainty regarding the unity of OPEC+ and their ability to agree on continued production cutbacks at this coming week’s OPEC meeting.  In addition, President Trump’s signing of legislation supporting Hong Kong protesters reduced optimism of a U.S.-China phase one trade agreement. Natural gas prices plummeted on the back of increased supplies (directly related to record U.S. crude oil production) and forecasts for mild weather in the coming weeks.

A record drop in Chinese industrial profits (reducing the outlook for Chinese nickel demand) and growing inventory levels helped pushed nickel prices lower during the week while copper and aluminum prices held firm on hopes of a U.S.-China trade agreement.

Stronger-than-expected U.S. economic reports and optimism of a U.S.-China trade agreement helped move gold, silver and platinum prices lower on the week.  

Corn and wheat prices moved higher with greater-than-expected exports (as reported by the USDA).  Wheat prices also benefited from forecasts of Argentina wheat production falling dramatically.  Soybean prices suffered from uncertainty regarding a U.S.-China trade agreement following President Trump signing legislation supporting Hong Kong protesters.

Coming up this week      

  • Decent data week with manufacturing and service PMI reports,  an OPEC meeting and capped off with the employment situation report on Friday.
  • Markit and ISM manufacturing PMIs and construction spending on Monday.
  • Markit and ISM non-manufacturing PMIs on Wednesday.
  • OPEC meeting, jobless claims, exports-imports and factory orders on Thursday.
  • Employment situation report and Michigan consumer survey on Friday.
  • 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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