Commodities and Precious Metals Update (Week Ending Mar. 8)
Posted:
Key points
- The energy sector was the best performing sector last week with all components ending higher except for gasoil and heating oil. WTI and Brent crude oil prices were up 1.0% and 0.4%, respectively while gasoline prices climbed 3.25% and natural gas prices rose 0.2%. Gasoil prices declined 1.3% and heating oil prices ended the week almost unchanged falling 0.1%.
- Grain prices were all lower again last. Chicago and Kansas wheat prices fell 3.9% and 3.2%, respectively. Soybean prices declined 1.7% while corn prices lost 2.4%.
- Base metal prices were all lower as well. Zinc and aluminum prices fell the most losing 2.8% and 2.6%, respectively. Copper prices were down 1.3% and nickel prices declined 0.9%.
- Lean hog prices jumped 7.3% last week.
- Gold prices fell 1.2% on the week while silver prices increased 0.6%. Platinum prices fell 5.1%.
- The S&P GSCI outperformed the Bloomberg Commodity Index last week. The S&P GSCI edged up 0.07% while the Bloomberg Commodity Index fell 0.57%. The S&P GSCI’s larger exposure to energy and smaller exposure to base metals and grains was primarily responsible for its outperformance.
- Total assets in commodity ETPs decreased again last week, falling $263.9m. Outflows from gold (-$214.3m), energy (ex-crude oil) (-$45.9m), precious metals (ex-gold and silver) (-$32.5m) and crude oil (-$21.1m) ETPs were partially offset by broad commodity ($78.9m) ETP inflows.
Commentary
Uncertainty over the completion of a U.S. –China trade agreement and weak economic numbers from the U.S., EU and China pushed most commodity prices and the U.S. stock markets lower last week. Friday’s much-lower-than-expected employment situation report combined with China’s much-smaller-than-expected February trade surplus along with increased uncertainty of a U.S-China trade agreement pushed the S&P 500 Index down 2.5% and moved 10-year U.S. Treasury rates down nearly 13bps to 2.63%. The U.S. dollar strengthened 0.9% (as measured by the DXY currency index).
Despite a much-larger-than-expected increase in U.S. oil inventories as reported by the EIA on Wednesday and increased concerns of weaker global growth, WTI crude oil prices finished higher on the week. Though the EIA’s report showed higher U.S. oil inventories it also reported another drawdown in total product inventories while the Baker-Hughes rig report showed another weekly decline in working U.S. rigs.
A combination of global growth concerns, uncertainty regarding a U.S.-China trade agreement and a stronger U.S. dollar helped push base metal prices lower last week with most of the decline occurring on Friday after weak economic reports from both China and the U.S.
Though gold prices as measured by the LBMA official settlement price were down a little over 1% on the week, they moved almost 1% percent higher on Friday. Despite a stronger U.S. dollar, a much-weaker-than-expected economic reports out of the U.S. and China on Friday helped support gold prices higher. Silver prices moved with gold prices while platinum prices moved base metal prices.
Wheat prices continued to decline last week with the FAO forecasting larger crop harvests for the current year versus last year and following increased expectations of bumper crops in both the EU and Russia. Corn and soybean prices moved lower on global growth and U.S.-China trade concerns.
Lean hog prices moved higher on larger-than-expected pork exports resulting from China’s depleting hog supply due to swine fever.
Coming up this week
- Fairly full week of data with inflation numbers headlining the week.
- Retail sales on Monday.
- CPI on Tuesday.
- PPI and durable goods orders on Wednesday.
- Jobless claims and new home sales on Thursday.
- EIA Petroleum Report on Wednesday and Baker-Hughes Rig Count on Friday.
Who is Jeff Klearman in our research team? 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.
