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Commodities and Precious Metals Update (Week ending June 14)

Posted:
Topic: Gold , Commodities
Publication Type: Market Commentaries
Commodities and Precious Metals Update (Week ending June 14)

Key points 

  • Another mixed week for energy commodities. WTI and Brent crude oil prices were down 2.4% and 1.9%, respectively, and gasoline price fell 0.5%. Gasoil, heating oil and natural gas prices rose 0.4%, 0.1% and 2.33%, respectively.
  • The grain sector was the best performing. Chicago and Kansas wheat prices rose 6.4% and 5.7%, respectively, and corn and soybean prices increased 8.0% and 4.6%, respectively.
  • Base metal prices were mixed last week. Aluminum and zinc prices decreased 0.2% and 1.1%, respectively, while copper and nickel prices increased 0.1% and 2.1%, respectively.
  • Gold and platinum prices moved higher again last week while silver prices declined. Gold prices rose 0.8%, platinum prices gained 0.3% and silver prices lost 1.5%. 
  • Coffee prices moved lower last week falling 5.4%. 
  • The Bloomberg Commodity Index outperformed the S&P GSCI last week with the Bloomberg Commodity Index increasing 0.93% and the S&P GSCI declining 0.06%. The Bloomberg Commodity Index’s smaller exposure to WTI and Brent crude oil but larger exposure to natural gas and grains was primarily responsible for its outperformance,
  • Total assets in commodity ETPs increased $455.3m last week. Gold ($475.9m), silver ($53.9m) and crude oil ($63.9m) ETP inflows were offset primarily by broad commodity (-$89.6m).

Commentary

Oil tanker attacks attributed to Iran by both the U.S. and Britain, better-than-expected U.S and weaker than expected China economic rerpots combined to push the U.S. dollar higher and leave both 10-year U.S. Treasury rates and the S&P 500 index practically unchanged from the previous week.  Increased geopolitical tensions between Iran and the U.S. combined with better-then-expected retails sales and as-expected inflation numbers pushed the U.S dollar higher, left the 10-year U.S. Treasury rate practically unchanged and moved the S&P 500 Index slightly higher.  At week’s end, the U.S. dollar (as measured by the DXY Index) strengthened 0.61%, the S&P 500 index increased 0.4% and the 10-year U.S. Treasury rate was unchanged at 2.08%.

WTI crude oil prices fell sharply through Wednesday, pushed lower by increased concerns of lower global growth and, once again, larger than expected increases in U.S. oil inventory as reported by the EIA. Down over 5.0% through Wednesday, WTI crude oil prices rallied 2.7% Thursday and Friday after the occurrence of oil tanker attacks in the Gulf of Oman attributed to Iran by both the U.S. and Britain.

Base metal prices initially moved higher last week as China announced new infrastructure stimulus spending and a U.S. – Mexico agreement preventing the implementation of tariffs on Mexican imports only to be pushed lower toward the end of the week on concerns of lower Chinese growth after China reported lower-than-expected car sales.

Despite a stronger U.S. dollar, gold prices moved higher on increased U.S. – Iran tensions but were restrained by better-than-expected U.S. economic reports and a U.S.- Mexico border agreement curtailing the implementation of tariffs on Mexican imports. Platinum prices moved higher with gold prices while silver prices moved lower with base metal prices.

Corn and wheat prices moved higher after the USDA released a lower-than-expected harvest yield for U.S crops while soybean prices moved higher on expectation the USDA would lower harvest yields in its July report.

Coffee prices fell as a result of dry, favorable harvest weather.   

Coming up this week      

  • Light data week highlighted by 2-day FOMC meeting beginning Tuesday.
  • Housing starts on Tuesday.
  • FOMC meeting announcement and forecast at 2pm on Tuesday.
  • Fed Chairman Jerome Powell press conference at 2:30pm on Tuesday.
  • Jobless claims and Philadelphia Fed. Business outlook survey on Thursday.
  • Existing home sales 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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