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

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.
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