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GraniteShares

Research

Commodities and Precious Metals Report – Week Ending Nov. 30

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

Key points

  • With the exception of heating oil, all futures contract prices in the energy sector increased last week.  WTI and Brent crude oil prices increased 1.0% and 0.6%, respectively, and gasoline prices increased 1.9%.   Natural gas prices continued their climb, increasing 5.9%.   Heating oil prices, the lone decliner, fell 2.2%.
  • Base metal prices all increased last week with nickel prices increasing the most, gaining 2.6%. Aluminum and zinc prices increased 0.6% and 0.9%, respectively, while copper prices increased slightly, gaining 0.1%.
  • Grain prices were all higher last week as well.  Chicago wheat prices increased 1.7%, Kansas wheat prices increased 2.9%, corn prices increased 2.0% and soybean prices finished the week up 1.6%.
  • Gold prices finished lower last week, falling 0.5%.  Silver prices declined 1.0% and platinum prices fell 3.9%.
  • The Bloomberg Commodity Index outperformed the S&P GSCI last week.  The Bloomberg Commodity Index increased 1.37% while the S&P GSCI increased 0.78%.  The Bloomberg Commodity Index’s larger base metal, grains and natural gas exposures were primarily responsible for its outperformance.
  • Total assets in commodity ETPs fell $189.9m. Broad commodity (-$51.7m), silver (-$50.4m), energy (ex-crude oil) (-$47.6m) and gold (-$21.6m) ETP outflows primarily responsible for the ETP outflows.   There were no significant inflows last week.

Commentary

A combination of growing expectations of a positive meeting between the U.S. and China during the weekend’s G20 conference in Argentina and dovish comments from Fed Chairman Jerome Powell regarding monetary policy helped move U.S. equity markets higher and the U.S. dollar and 10-year Treasury rates lower. Though initially starting the week with threats to increase sanctions on Chinese imports, Trump administration statements during the week hinted at the possibility of reduced trade frictions resulting from meetings between President Trump and Chinese president Xi Jinping.  Fed Chairman Jerome Powell, in a speech on Wednesday, announced the Fed Funds rate was near a neutral level,reversing more hawkish comments made earlier in the month.   At week’s end the U.S. dollar weakened by about 0.3%, 10-year interest rates were lower almost by 5 bps at 2.99% and the S&P 500 Index increased 4.8%.

Crude oil prices finished up on the week, though off their highs set early in the week on hopes OPEC and Russia-led producers would work to implement production cutbacks at their upcoming Dec 6, meeting.  Wednesday’s EIA report showing another increase in U.S. oil inventories helped move oil prices off their highs.   Natural gas prices continued their climb higher on the back of historically low inventories, record exports and frigid weather (actual and forecast) for a large part of the U.S.  Heating oil prices gave back some of their outperformance over the previous weeks (due to cold weather) as a result of the continued increase in U.S. crude oil inventories.

Base metal prices benefited from increased expectations of reduced trade frictions and a slightly weaker U.S. dollar. Nickel prices, down 1% through Wednesday, rose over almost 3.6% on increased bullish expectations of growing demand for nickel for EV batteries.

Though slightly lower on the week, gold prices were supported by expectations of reduced trade frictions between the U.S and China and over speculation the U.S Federal Reserve bank may reduce the number of rate increases next year.  

Grain prices increased on the back of hopes of reduced trade frictions between the U.S. and China at the G20 meeting over the weekend in Argentina as well as on adverse weather in the U.S delaying grain harvests and plantings.

Coming up this week      

  • Light data week, capped by the employment situation report on Friday.
  • ISM manufacturing index on Monday and ISM non-manufacturing index on Wednesday.
  • Fed Chairman Jerome Powell speaks on Wednesday.
  • Jobless claims and international trade on Thursday.
  • EIA Petroleum Report on Wednesday and Baker-Hughes Rig Count on Friday.

Important Information

Past performance is no guarantee of future results.

Investing in physical commodities, including through commodity-linked derivative instruments such as Commodity Futures, Commodity Swaps, as well as other commodity-linked instruments, is speculative and can be extremely volatile, and may not be suitable for all investors. Market prices of commodities may fluctuate rapidly based on numerous factors, including: changes in supply and demand relationships (whether actual, perceived, anticipated, unanticipated or unrealized); weather; agriculture; trade; domestic and foreign political and economic events and policies; diseases; pestilence; technological developments; currency exchange rate fluctuations; and monetary and other governmental policies, action and inaction.

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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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