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Research

Commodities and Precious Metals Update (Week Ending Apr. 12)

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

Key points 

  • The energy sector again was the best performing sector last week, with all components except natural gas ending higher. WTI and Brent crude oil prices increased 1.5% and 1.6%, respectively. Gasoil and heating oil prices rose 2.2% and 1.4%, respectively and gasoline prices rose 3.2%. Natural gas prices were unchanged.
  • The grain sector also performed well with all components higher.   Corn prices increased 1.7%. Chicago wheat prices increased 2.2% and Kansas wheat prices gained 0.3%. Soybean prices increased 1.7%.
  • Another mixed week for base metal prices. Aluminum and nickel prices were down 1.6% and 0.4%, respectively. Copper and zinc prices increased 1.7% and 0.2%, respectively.
  • Gold prices ended the week higher, increasing 0.5% while silver and platinum prices declined 0.8% and 0.4%, respectively.
  • The S&P GSCI again outperformed the Bloomberg Commodity Index last week.  The S&P GSCI increased 1.05% and the Bloomberg Commodity Index gained 0.46%. The S&P GSCI’s larger exposure to energy was primarily responsible for its outperformance.
  • Total assets in commodity ETPs rose $52.4m last week. crude oil Broad commodity ($175m) ETP inflows were primarily offset by gold (-$122.8m) ETP outflows.

Commentary

Initially falling early in the week on the IMF’s reduced global and U.S. economic growth forecast for 2019, commodity and U.S. stocks markets finished the week higher after strong U.S. bank earnings and Chinese trade and lending reports on Friday. Down 0.5% through Tuesday, the S&P 500 Index increased a little over 1% the remainder of the week to finish up 0.5%. Down 4bps through Thursday, the 10-year U.S. Treasury rate finished the week 7bps higher at 2.57% after stronger-than-expected U.S earning reports and PPI numbers. The U.S. dollar, as measured by the DXY index, weakened 0.4% on the back of stronger-than-expected Chinese trade export numbers and reduced U.S. economic concerns due to strong earning reports.

Though off their mid-week highs as a result of a much-larger-than expected increase in U.S. inventories, WTI crude oil prices ended the week higher supported by continued production and export concerns in Venezuela, Libya and Iran and greater-than-agreed-upon Saudi Arabia production cutbacks.

Increased global growth concerns precipitated by the IMF’s reduced growth forecast for 2019 helped pushed most base metal prices lower through Thursday last week. Friday’s stronger-than-expected Chinese export numbers and a weaker U.S. dollar supported base metal prices, moving copper and zinc higher on the week.

Supported by increased Chinese buying, benign CPI numbers and as-expected FOMC minutes reaffirming the U.S. Federal Reserve Bank will likely leave rates unchanged this year, gold and silver prices moved higher through Wednesday of last week. A greater-than-expected PPI report on Thursday and strong earnings reports on Friday helped move gold and silver prices lower the remainder of the week with expectations of a 2019 rate increase in the U.S. increasing.

Grain prices moved lower on a larger-than-expected USDA inventory forecast released mid-week but were supported by increased plantings concerns due to inclement weather, including forecasts of blizzard conditions in Montana and North Dakota, experienced prior and during the start of the planting season.

Coming up this week      

  • Very light data week highlighted by industrial production and retail sales.
  • Industrial Production on Monday.
  • Jobless claims, Philadelphia Fed business outlook survey and retails sales on Thursday.
  • Housing starts 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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