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Commodities and Precious Metals Update (Week ending January 17, 2020)

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

Key points 

 

Energy prices were all lower last week.  Natural gas prices, down the most, fell 8.4%, followed by gasoil and heating oil prices which fell 4.0% and 3.4%, respectively.  WTI and Brent crude oil prices decreased 0.7% and 0.5%, respectively and gasoline prices lost 0.8%.

Grain prices were mixed. Chicago wheat prices increased 1.1% while Kansas wheat prices edged lower 0.1%.  Corn prices rose 0.9% while soybean prices fell 1.7%.

Base metal prices were also mixed. Nickel prices fell 2.0% and aluminum prices moved lower 0.1%.  Copper and zinc prices rose 1.1% and 2.4%, respectively.

Gold prices moved slightly higher, increasing 0.3%, while silver prices moved slightly lower, falling 0.2%.  Platinum prices jumped higher, increasing 4.9% and breaking through $1,000/ounce.

Coffee prices fell 5.7%.

The Bloomberg Commodity Index fell 1.07%, pushed lower mainly by falling energy prices.

Total assets in commodity ETPs surged last week, increasing $1,575.1m, with gold and broad commodity ETPs responsible for the lion’s share of the increase.  Gold ETP AUM increased by $1,185.7m, broad commodity ETP AUM increased by $370.5 and silver and precious metals (ex-gold and silver) increased by a combined $71.4m. Silver ETPs experienced the only significant outflows with AUM declining by $45.2m.

Commentary

Stronger-than-expected U.S. economic reports (retail sales, housing starts and jobless claims), moderate inflation and good earning releases drove the S&P 500 to another record high.  In addition, the official signing of the U.S.-China Phase One trade agreement and the removal of the designation of China as a currency manipulator along with a stronger-than-expected Chinese industrial production report,  helped move U.S and global stock markets higher while strengthening the U.S. dollar.  At week’s end the S&P 500 Index increased 1.6% to 3329.62, the 10-year U.S. Treasury rate was unchanged at 1.82% and the U.S. dollar (as measured by the DXY index) strengthened 0.3%.

WTI Crude oil prices, lower through Tuesday on reduced concerns of a U.S.-Iran conflict, fell almost 1% on Wednesday after the EIA reported a much-larger-than-expected build in U.S. gasoline and distillate inventories.   Thursday’s strong retail sales report, Friday’s extremely strong U.S. housing starts report along with a stronger-than-expected Chinese industrial production report pushed oil prices 1.3% higher from Wednesday lows.

Overcoming concerns of continuing U.S.-China trade frictions despite the signing of the Phase One trade agreement, copper and zinc prices moved higher following stronger-than-expected economic reports both in the U.S. and China.   Nickel prices fell on increased supply concerns.

Once again, gold prices moved higher despite reduced concerns of a U.S-Iran conflict.  Subdued U.S. CPI and PPI reports, the start of President Trump’s impeachment trial and concerns of continued U.S.-China trade frictions despite the signing of the Phase One trade agreement supported gold prices.  Platinum prices, perhaps following the meteoric rise in Palladium prices, increased almost 5% and broke through $1,000/ounce.

Wheat prices continued to move higher on the back of global supply shortage concerns and higher export prices.  Corn prices jumped over 3.5% on Friday after falling over 2.5% on Thursday with vacillating sentiment regarding Chinese buying.     Soybean prices continued to suffer from concerns of oversupply and uncertainty surrounding future Chinese purchases.

Coming up this week      

  • Light holiday-shortened data week.
  • Existing home sales and Chicago Fed national activity index on Wednesday.
  • Jobless claims and Conference Board leading economic index on Thursday.
  • Markit manufacturing and services flash PMIs on Friday.
  • EIA petroleum report on Thursday 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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