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Research

Commodities and Precious Metals Update (Week Ending Mar. 15)

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

Key points 

  • All components of the energy sector except natural gas and heating oil finished higher last week.  WTI oil prices were up the most, increasing 4.2%.  Brent crude oil prices were up 2.0%, gasoline prices increased 2.5 and gasoil prices rose 1.3%.  Natural gas and heating oil prices fell 2.4% and 1.1%, respectively.
  • Grain prices were all higher last week with Chicago wheat prices increasing the most.  Chicago and Kansas wheat prices rose 5.2% and 2.8%, respectively, while corn prices increased 2.5% and soybean prices gained 1.5%.
  • Except for nickel prices, base metal prices were all higher last week.  Zinc prices increased 3.0%, aluminum prices rose 1.2% and copper prices gained 0.4%.   Nickel prices lost 1.3%.
  • Gold and platinum prices were up last week as well with gold prices increasing 0.5% and platinum prices rising 1.6%.  Silver prices were down 0.2%.
  • The S&P GSCI outperformed the Bloomberg Commodity Index last week with S&P GSCI rising 2.32% while the Bloomberg Commodity Index rose 1.44%.  The S&P GSCI’s larger exposure to energy but smaller exposure natural gas was primarily responsible for its outperformance.
  • Total assets in commodity ETPs increased last week, rising $129.2m. Gold ($208.9m) and silver ($25.5m) ETP inflows were mainly offset by crude oil (-$109.9m) ETP outflows.

Commentary

Stronger-than-expected durable goods orders, consumer sentiment and job openings numbers combined with tepid inflation numbers overcame larger-than-expected jobless claims and disappointing industrial production numbers and helped push commodity and U.S. stock markets higher.   Increasing concerns about global growth brought on by Wednesday’s announcement by President Trump stating there would be no meeting with Chinese President Xi this month and that there was no rush to have a meeting, were reversed on Friday with optimism increasing over a U.S.-China trade agreement and with Chinese statements promising more economic stimulus.   At week’s end the S&P 500 index increased 2.9%, the U.S. dollar weakened -0.7% and the 10-year U.S. Treasury rate was lower by 3bp at 2.59%

Crude oil prices moved higher again last week supported by a much-larger-than-expected decrease in U.S. inventory levels and reports Saudi Arabia intended to continue its large cutbacks.  Lower Venezuelan oil exports, concerns of potential production problems in Algeria and a drop in active U.S. rigs again last week also supported prices.   

Increasing supply concerns, Chinese plans to increase stimulus and a weaker U.S. dollar all helped to push most base metal prices higher.  Nickel prices suffered as Chinese production of nickel pig iron increased to offset refined nickel supply shortages.

Gold prices moved higher with increased Brexit uncertainty, a weaker dollar and as a result of Chinese plans to increase stimulus, including record tax cuts.  Platinum prices moved higher with base metal prices.

Wheat prices reversed course last week increasing over late-winter weather crop concerns and as a result of hopes of larger-than-expected exports.  Wheat prices also may have moved higher as short futures positions were closed out.  Corn and soybean prices moved higher on renewed hopes of Chinese buying.

Lean hog prices surged higher again last week with China purchasing the most pork from the U.S. in over 2 years.   Swine fever continues to deplete hog herds and has reportedly spread to Vietnam.

Coming up this week      

  • 2-day FOMC meeting beginning Tuesday highlights this week’s data.
  • Housing market index on Monday.
  • FOMC meeting begins and factory orders on Tuesday.
  • FOMC announcement/forecasts and Fed Chairman press conference Wednesday afternoon.
  • Jobless claims and Philadelphia Fed business outlook survey 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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