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Commodities and Precious Metals Update (Week Ending Apr. 5)

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

Key points 

  • The energy sector was the best performing sector last week, with all components ending higher.  WTI and Brent crude oil prices increased 4.9% and 4.1%, respectively. Gasoil and heating oil prices rose 2.0% and 3.6%, respectively.  Gasoline prices rose 4.6% while natural gas prices were practically unchanged at up 0.1%
  • 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%.
  • A mixed week for base metal prices. Aluminum and copper prices were down, declining 1.5% and 1.4%, respectively, while nickel prices increased 0.6%.  Zinc prices were unchanged.
  • Gold and silver prices ended the week lower, declining 0.5% and 0.2%, respectively.  Platinum prices move higher again last week, climbing 6.2%.
  • Lean hog prices reversed course from last week jumping 11.8%.
  • The S&P GSCI outperformed the Bloomberg Commodity Index last week with the S&P GSCI up 3.03% and the Bloomberg Commodity Index up 1.63%. The S&P GSCI’s larger exposure to energy was primarily responsible for its outperformance.
  • Total assets in commodity ETPs fell $1,155.1m last week. Gold     (-$936.1m), crude oil (-$95.9m) and broad commodity (-$95.2m)  were primarily responsible for the  ETP outflows.

Commentary

Positive economic reports from both the U.S. and China combined with increased optimism over a U.S.-China trade agreement pushed U.S stock and commodity markets higher last week. A slew of solid U.S economic reports – including ISM manufacturing index, durable goods orders and jobless claims –  throughout the week,  culminating with a better-than-expected employment situation report on Friday along with better-than-expected Chinese manufacturing data on Monday helped push the S&P 500 Index up 2.1% and the Bloomberg Commodity index up 1.6%.  The 10-year U.S. Treasury rate increased 10bps to 2.50% and the U.S. dollar as measured by the DXY index strengthened 0.1%.

Despite a much-larger-than-expected increase in U.S. oil inventories and a rise in active U.S rigs last week, WTI crude prices moved higher again last week.   Strong economic reports in both the U.S. and China, increased optimism over a U.S.-China trade agreement, one-time extenuating factors increasing U.S. inventory levels and lower Saudi Arabia production helped push WTI oil price higher by almost 5% for the week and just under 39% for the year.

Most base metal prices moved higher through Wednesday last week on renewed optimism over a U.S.-China trade agreement and a strong Chinese manufacturing report on Monday. Zinc and Nickel prices were also supported over concerns of supply shortages. Base metal prices moved lower Thursday and Friday with expectations of a final U.S.-China trade agreement still weeks away.  Copper prices also suffered as inventory levels tracked by LME increased on Friday for the fifth week in a row.

Gold and silver prices moved lower as the 10-year U.S. interest rate moved higher and the dollar slightly strengthened.  Platinum prices enjoyed their biggest increase in over 2 years, pushing off their lows relative to palladium and gold prices. Platinum prices are up 13.7% year-to-date.

Corn, wheat and soybean prices all increased last week supported by strong U.S and Chinese economic reports and increased hopes of a U.S.-China trade agreement.  Increased U.S wheat exports combined with shrinking wheat plantings also supported wheat prices.

Lean hog prices soared 11.8% with swine fever reported in another Chinese province increasing fears of the spread of the disease.

Coming up this week      

  • Moderate data week accentuated by inflation numbers, the release of FOMC minutes and Fed. Chairman Jerome Powell speaking Wednesday through Friday.
  • Factory orders on Monday.
  • CPI and release of FOMC minutes on Wednesday.
  • PPI and Jobless claims on Thursday.
  • Consumer sentiment on Friday.
  • EIA Petroleum Report on Wednesday and Baker-Hughes Rig Count on Friday.

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