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Research

Commodities and Precious Metals Update (Week ending June 28)

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

Key points 

  • A positive week for energy futures. WTI and Brent crude oil prices increased 1.8% and 0.5%, respectively, gasoline prices increased 4.2%, heating oil prices rose 0.9% and gasoil prices gained 1.5%. Natural gas prices also rose, increasing 6.5%.
  • The grain sector was again the worst performing sector last week.  Chicago and Kansas wheat prices both decreased 0.7% and soybean prices decreased 0.5%. Corn prices stumbled 5.1% lower.
  • It was a positive week for base metal futures as well. Nickel prices increased the most, gaining 5.1%, followed by zinc, up 2.6%.  Aluminum prices increased 1.8% and copper prices rose 0.4%.
  • Gold and platinum prices moved higher last week while silver prices moved lower. Gold prices increased 0.9% and platinum prices increased 1.9%. Silver prices decreased slightly, falling 0.2%.
  • Coffee prices jumped 8.7% higher.
  • The S&P GSCI slightly underperformed the Bloomberg Commodity Index last week with the S&P GSCI increasing 1.04% versus the Bloomberg Commodity Index increasing 1.08%. The S&P GSCI’s smaller exposer to natural gas was the primary reason for its underperformance.
  • Total assets in commodity ETPs decreased $34.2m last week. Crude oil (-$104.7m) and broad commodity (-$70.7m) ETP outflows were partially offset by gold ($53.6m), silver ($53.7m), precious metals (ex-silver and gold) ($22.7m) and energy (ex-crude oil) ($20.3m) ETP inflows.

Commentary

Comments from U.S Federal Reserve Bank officials, including Fed Chairman Jerome Powell, lowered expectations of two rate cuts this year, pushing U.S stock markets slightly lower while leaving the U.S. dollar practically unchanged. In addition, cautious optimism of improving U.S. – China trade relations and a slew of economic reports both better and worse than expected added to the U.S. stock markets and U.S. dollar malaise. At week’s end the U.S. dollar was unchanged, the S&P 500 Index was down 0.3% and the 10-year U.S. Treasury rate fell  5bps to 2.00%.

Up 3.5% through Thursday on the back of a much-larger-than-expected drawdown in U.S. oil inventories, WTI crude oil prices fell 1.6% just before the close on Friday with increased concerns OPEC+ cutbacks going forward may not be sufficient to reduce the oversupply of oil.   

Though finishing the week slightly off their Thursday’s high, nickel prices closed at a 2-month high following a steep fall in LME inventory and continued supply shortage concerns. Copper prices, up 1.1% through Wednesday on supply concerns, fell the remainder of the week over increased optimism the strike at the Chilean copper mine Codelco would soon end.

Gold prices moved higher again last week, closing above $1400 per ounce but off their Tuesday’s high, after comments from U.S. Federal Reserve Bank officials reduced expectations of 2 rate decreases this year. 

Corn prices, down 0.4% through Friday, dropped 4.7% on Friday after the USDA reported much-higher-than-expected crop planting estimates.  Wheat prices, up over 3% through Thursday, also dropped 4% over concerns increased corn plantings would reduce wheat demand. Soybean prices rose 1.1% on Friday after the USDA reported much-lower-than-expected crop planting estimates.

Coffee prices rose, supported by a weak Brazilian real and concerns of lower supply from Brazil.

Coming up this week      

  • Light holiday-shortened trading week highlighted by the employment situation report on Friday.
  • ISM manufacturing index on Monday.
  • Jobless claims and international trade on Wednesday.
  • Employment situation report 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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