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Commodities and Precious Metals Update (Week Ending Feb. 8)

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

Key points 

  • The energy sector was mixed last week with WTI and Brent crude oil and natural gas prices ending lower and gasoline and gasoil prices finishing higher.  WTI and Brent crude prices fell 4.6% and 1.2%, respectively, while gasoline and gasoil prices rose 0.7% and 0.6%, respectively.  Heating oil prices were down slightly, declining 0.2%.
  • Base metals prices were all lower except for copper prices. Zinc prices, down the most, fell 3.1%, nickel prices decreased 0.8% and aluminum prices fell 0.2%.  Copper prices rose 1.4%.
  • Grain prices were all lower last week.  Wheat prices fell between 1.3% (Chicago wheat) and 2.9% (Kansas wheat) while corn and soybean prices fell 1.1% and 0.4%, respectively.  
  • Gold, silver and platinum prices all moved lower last week.  Gold prices fell 0.3% while silver and platinum price declined 0.8% and 3.1%, respectively.
  • The S&P GSCI underperformed the Bloomberg Commodity Index last week.  The Bloomberg Commodity Index decreased 1.06% while the S&P GSCI fell 1.60%.  The Bloomberg Commodity Index’s lower exposure to energy was primarily responsible for its outperformance.
  • Total assets in commodity ETPs decreased $258m last week. Gold (-$372.3m) ETP outflows were offset primarily by broad commodity ($50.1m) and energy (ex-crude oil) ($59.8m) ETP inflows.

Commentary

Markedly lower European Union growth forecasts combined with reduced expectations of a US-China trade agreement before March 1st moved the U.S. dollar higher and commodity prices lower last week.  The S&P 500 Index, lower through Thursday, recovered most of its losses on Friday after better-than-expected tech earning were reported.   At week’s end the U.S. dollar strengthened 1.1%, 10-year U.S. Treasury rates decreased 5bps to 2.63% and the S&P 500 Index was almost unchanged, increasing 0.05%.   

Crude oil prices finished lower last week on the back of increased expectations of lower global growth particularly in China and the EU.   An increase in U.S. oil rigs as reported by Baker Hughes also helped push crude oil prices lower despite the EIA reporting greater-than-expected drawdowns in winter fuel inventories.  Gasoline and gasoil prices were supported by reduced imports of heavy crude preferred by refineries as a result of U.S. sanctions on Venezuela.

Base metal prices were pushed lower mainly on the back of a stronger U.S. dollar.  Copper prices, however, ended the week higher despite renewed concerns over a U.S.- China trade agreement.

Gold and silver prices, too, were pushed lower by a stronger U.S. dollar. 

Soybean prices moved lower after the USDA lowered forecasts for China imports this year while confirming record U.S. soybean production and higher U.S. inventory levels. Wheat prices fell on the back of higher-than-expected inventory levels while corn prices moved lower in sympathy with wheat and soybean prices.

Coming up this week      

  • Lighter data week with inflation reports on Wednesday and Thursday.
  • CPI and Treasury budget on Wednesday.
  • Jobless claims, PPI and retail sales on Thursday.
  • Industrial production on Friday.
  • Jobless claims on Thursday.
  • 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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