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Commodities and Precious Metals Update (Week ending November 22, 2019)

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

Key points

Energy prices, except for gasoline prices, were all lower last week.  WTI and Brent crude decreased slightly, declining 0.1% while gasoil and heating oil prices fell 0.7% and 0.8%, respectively and natural gas prices decreased 1.5%.  Gasoline prices rose 2.4%.

Grain prices were mixed last week with wheat prices increasing and corn and soybean prices decreasing.  Chicago wheat prices rose the most, increasing 2.5% while Kansas wheat prices increased 1.8%.   Corn prices fell 0.6% and soybean prices fell 2.3%.

Platinum and silver prices increased last week while gold prices edged slightly lower.  Platinum prices rose 2.0%, silver prices gained 0.3% and gold prices fell 0.2%.

Base metal prices, except for copper prices, were all lower last week.  Zinc and nickel prices again declined the most falling 2.9% and 2.3%, respectively and aluminum prices fell 1.0%. Copper prices increased 0.3%.

Lean hog prices dropped 6.0% and coffee prices increased 5.5%. 

The Bloomberg Commodity Index decreased 0.43% last week.  Base metals, livestock, grains and energy sectors were the main reasons for the move lower with the softs sector (primarily coffee) the only sector moving higher on the week.

Total assets in commodity ETPs fell $257.0m last week.       Gold (-$155.4m), crude oil (-$73.2m), broad commodity (-$27.2m), silver (-$14.8m) and agriculture (-$13.8m) ETP outflows were slightly offset by energy (ex-crude oil) ($42.1m) ETP inflows.

Commentary

Reaching all-time highs on Monday, U.S. stock markets moved lower through Thursday on a disappointing retails sales report and reduced expectations of a U.S.-China trade agreement before the end of the year. Vacillating reports from the Trump administration as well as China regarding the progress of U.S.-China trade talks – exacerbated by U.S. support of Hong Kong protestors – moved 10-year U.S. Treasury rates and the U.S. dollar lower through Thursday as well.   Comments by Chinese President Xi Jinping calling for increased communications between the U.S. and China, positive comments from President Trump regarding U.S.-China trade frictions and stronger-than-expected economic reports on Friday moved U.S. stock markets, 10-year U.S. Treasury rates and the U.S. dollar off their lows of the week.   At week’s end the S&P 500 was down 0.3% to 3110.29, 10-year U.S. Treasury rates fell 6bps to 1.77% and the U.S. dollar strengthened (all on Friday) 0.3% (as measured by the DXY index).

Up 1.3% through Thursday on lower-than-expected U.S. oil inventory levels and reports OPEC+ would continue production cutbacks through June next year, WTI crude oil prices fell about 1.4% on Friday on profit-taking and on increased concerns the global market will be significantly oversupplied next year even if OPEC+ agreed to extend current production cutbacks.

Base metal prices moved lower through Thursday last week, pushed lower mainly by increased concerns regarding a U.S.-China trade agreement. Statements on Friday by Chinese President Xi calling for stronger communication between the U.S and China and analyst statements forecasting tighter nickel and zinc supply conditions next year, moved base metal prices off their lows.

Gold prices, slightly higher through Thursday, dropped about ¾ percent on Friday on stronger-than-expected U.S. economic reports and with positive comments regarding U.S.-China trade negotiations from both China and the U.S.  Silver and platinum prices moved higher with continued investor demand as haven investments.

Soybean prices moved lower on of U.S-China trade concerns and better-than-forecast weather in South America.  Wheat prices gained on expectations of stronger export demand for U.S. wheat.

Coffee prices continued their move higher benefiting from undersupply concerns as a result of reduced plantings in Brazil.

Coming up this week      

  • Fairly busy data week despite the Thanksgiving holiday shortened week.
  • International trade in goods, new home sales and consumer confidence on Tuesday.
  • Q3 GDP 2nd estimate, durable goods orders, jobless claims and personal income and outlays on Wednesday.
  • Chicago PMI 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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