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Research

Commodities and Precious Metals Update (Week ending August 23)

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

Key points

Energy prices were mixed last week with natural gas, WTI crude oil and gasoil prices falling and Brent crude oil, gasoline and heating oil prices rising. Natural gas prices fell 2.7%, WTI crude prices decreased 1.3% and gasoil prices lost 0.4%.   Brent crude oil prices rose 1.1%, gasoline prices gained 0.5% and heating oil prices increased 0.2%.  

Grain prices were unchanged or lower on the week. Chicago wheat prices were unchanged while Kansas wheat prices fell 1.2%, corn prices declined 3.4% and soybean prices lost 2.6%.

Base metal prices were all lower last week.  Aluminum and zinc prices fell 1.1% and 0.2%, respectively, and copper and nickel prices fell 2.5% and 3.2%, respectively.

Gold, platinum and silver prices increased last week.  Gold futures prices increased 0.9%, platinum prices increased 3.2% and silver prices rose 1.7%.

The S&P GSCI outperformed the Bloomberg Commodity Index last week.  The S&P GSCI decreased 0.60% while the Bloomberg Commodity Index decreased 0.88%.  The S&P GSCI’s larger exposure to energy but smaller exposure to natural gas and grains and base metals were the primary reasons for its better performance.

Total assets in commodity ETPs increased $958.5m last week. Gold ($982.9m), silver ($90.7m) and precious metals (ex-gold and silver) ($18.9m) ETP inflows were primarily offset by broad commodity (-$115.5m) and crude oil (-$17.7m) ETP outflows.

Commentary

U.S. stock markets and the U.S. dollar were higher through Thursday last week following the Trump administration’s positive statements and actions regarding U.S-China trade frictions and following the release of FOMC minutes  and Jerome Powell’s comments at Jackson Hole confirming the U.S. Federal Reserve Bank will act to maintain economic expansion.  Friday’s surprise announcement by China that it would be imposing 15% tariffs on an additional $75 billion of U.S. imports and President Trump’s tweet promising reprisals drove U.S. stock markets lower while weakening the U.S. dollar.  Falling 2.6% on Friday, the S&P 500 ended the week down 1.4%. and the U.S dollar weakened 0.6% on Friday to the end the week down 0.5%.   10-year U.S. Treasury rates were down only slightly, falling 2bp to 1.53%

WTI crude oil prices, up 2.6% through Tuesday, decreased a little over 1% after Wednesday’s EIA report showing a much-larger-than-expected build in gasoline and diesel inventories and then dropped another 2% on Friday after U.S.-China trade frictions flared with China announcing additional tariffs on $75 billion of U.S. imports, including oil.   

Base metal prices were pushed lower on increased concerns of weak global growth and a stronger U.S. dollar versus the Chinese yuan.   Nickel prices gave up some of their recent gains on reduced Indonesia supply concerns.

Gold futures prices, 1% lower through Thursday, moved higher late on Friday after trade tensions between the U.S. and China increased unexpectedly.  Platinum and silver prices increased with gold prices..

Grain prices moved lower over continued concerns that harvests and plantings were greater than expected.  Soybean prices also suffered from increased U.S.-China trade tensions with China announcing additional tariffs would be imposed on U.S. soybean imports.

Coming up this week      

  • Fairly busy data week with the second estimate of Q2 GDP released on Thursday.
  • Durable goods on Monday
  • Consumer confidence on Tuesday.
  • Q2 GDP, international trade in goods and jobless claims on Thursday.
  • Personal income and outlays and 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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