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Research

Commodities and Precious Metals Update (Week ending September 27)

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

Key points

Energy prices all finished lower last week. Natural gas prices, down the most, decreased 5.9%.   WTI and Brent crude oil prices fell 3.8% and 3.2%, respectively.   Gasoil and gasoline prices declined 2.5% and heating oil prices dropped 2.3%.

Grain prices were unchanged to slightly higher last week. Chicago wheat prices increased 0.6% and corn prices increased 0.2%.   Kansas wheat and soybean prices were unchanged. .

Base metal prices, except for zinc prices, were all lower again last week.  Aluminum and nickel prices decreased 3.4% and 1.7%, respectively and copper prices fell 0.4%.  Zinc prices increased 0.7%

Gold, silver and platinum prices ended the week lower as well. Gold and silver prices fell 0.8% and 1.1%, respectively and platinum prices decreased 1.6%.

The Bloomberg Commodity Index outperformed the S&P GSCI last week.  The S&P GSCI decreased 1.83% while the Bloomberg Commodity index decreased 1.05%.  The S&P GSCI’s larger energy exposure was primarily responsible for its underperformance.

Total assets in commodity ETPs increased $1,862.2m last week, driven mainly by large inflows into gold ETPs.  Gold ($1,677.0m), silver ($112.9m) and crude oil (116.9m) ETP inflows were slightly offset by broad commodity (-$35.2m) and agricultural (-$14.7m) ETP outflows.

Commentary

Weak economic reports in Europe and Asia along with the what may be the beginning of impeachment proceedings against President Trump pushed U.S. and global stock markets lower, strengthened the U.S. dollar and moved U.S. Treasury rates lower.   U.S. stock markets initially supported by increased optimism of reduced trade frictions with China were pressured lower by a weaker-than-expected consumer confidence report and reports the Trump administration may attempt to limit investments by U.S. money managers in Chinese stocks.  U.S. Federal Reserve Bank repo operations continued last week (necessitated by a reported hoarding of reserves by large banks) but did not affect markets.   At week’s end, the S&P 500 Index was down 0.5% at 2961.3, the U.S. dollar strengthened 0.6% and 10-year U.S. Treasury rates were down 4bps to 1.68%.

Oil prices, higher on Monday, moved lower the remainder of the week with concerns of weak global growth weighing on demand expectations and with Saudi Arabia’s much-improved repair and production time frame greatly reducing concerns of reduced Saudi oil supply.

Concerns over weak Eurozone, Chinese and U.S. economic growth as well as a stronger U.S. dollar pushed base metal prices lower last week.

Gold, silver and platinum prices moved lower despite concerns of slowing U.S. and global growth and despite renewed concerns over trade tensions with China.

Reduced optimism of a U.S.-China trade agreement pushed corn, wheat and soybean prices off their intra-week highs.   Better-than-expected corn yields and harvest numbers from the USDA also pressured corn prices.

Coming up this week      

  • Fairly full data week culminating with the employment situation report and Jerome Powell speaking on Friday.
  • Chicago PMI on Monday.
  • PMI and ISM manufacturing indexes on Tuesday.
  • Jobless claims, factory orders and ISM non-manufacturing index on Thursday.
  • Employment situation report, international trade and Jerome Powell speaking 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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