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Commodities and Precious Metals Update (Week ending October 18, 2019)

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

Key points

Except for natural gas prices, energy prices all moved lower last week. WTI and Brent crude prices fell 1.7%, gasoil prices decreased 1.0%, gasoline prices decreased 0.9% and heating oil prices fell 0.5%.   Natural gas prices increased 1.7%.

Grain prices were mixed with wheat prices moving higher and corn and soybean prices finishing lower. Chicago and Kansas wheat prices increased 4.8% and 3.4%, respectively.  Corn prices dropped 1.7% and soybean prices fell 0.3%.

Base metal prices, except for nickel prices, were all higher last week.  Aluminum prices increased 1.1%, copper prices increased 0.3% and zinc prices rose 1.8%.   Nickel prices dropped sharply, falling 7.2%.

Gold and silver prices increased last week while platinum prices decreased. Gold prices increased 0.7% and silver prices increased 0.4%.  Platinum prices declined 0.2%

The S&P GSCI underperformed the Bloomberg Commodity Index, with the S&P GSCI decreasing 0.63% versus the Bloomberg Commodity Index decreasing 0.17%.  The S&P GSCI’s larger energy exposure but smaller natural gas exposure was primarily responsible for its underperformance.

Total assets in commodity ETPs rose $258.2m last week, driven once again primarily by inflows into gold ETPs.  Gold ($295.7m), crude oil ($32.5m) and energy (ex-crude oil) ($18.5m) ETP inflows were partially offset by silver (-$70.8m)  and agriculture (-$19.5m) ETP outflows.

Commentary

Stronger-than-expected U.S. earnings reports overcame a weaker-than-expected retail sales report and reduced expectations of a U.S-China “partial” trade agreement last week. The S&P 500 Index, lower on Monday after China announced it wanted more talks before signing any trade agreement, rallied through Thursday on the back of stronger-than-expected U.S. earnings reports despite weaker-than-expected retail sales numbers released on Wednesday.   U.S. stock markets lost some ground on Friday after weaker-than-expected Chinese economic data and a couple of “missed” U.S. earnings reports.  At week’s end the S&P 500 index was up 0.5% at 2986.20, 10-year U.S. Treasury rates were up 2.5bps at 1.75% and the dollar weakened 1.0% as measured by the DXY index.

Down 3.3% through Tuesday on the back of increased concerns of slower global growth, WTI crude oil prices increased close to 2% over the rest of the week mainly as a result of a much larger-than-expected drawdown in fuel stocks outweighed a larger-than-expected build in U.S crude oil inventories.

Base metal prices, down through Thursday on reduced optimism over a U.S.–China “partial” trade agreement, rallied on Friday after reports the U.S. and China were making progress on the first phase of a trade deal.  Nickel prices, down over 7% on the week, suffered from concerns of more supply than previously expected.

Gold prices supported mainly by expectations of continued U.S. Federal Reserve Bank easing moved higher on the week.  Silver prices moved with gold prices while platinum prices gave up of some their recent gains on no new news.

Soybean and corn prices were pressured lower on reduced expectations regarding the timing and certainty of a U.S.–China partial trade agreement.   Wheat prices moved higher on increased dry weather concerns in South American and higher global export prices.

Coming up this week      

  • Busy data week with most reports occurring Thursday.
  • Existing homes sales and Richmond Fed manufacturing index on Tuesday.
  • Durable goods orders, jobless claims, PMI composite flash and new home sales on Thursday.
  • Consumer sentiment 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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