Commodities & Precious Metals Weekly Report: Apr 14
Posted:
Key points
Energy prices were mainly higher. Natural gas prices rose between 2% (July contract) and 5% (May contract). WTI crude oil prices increased 2% while Brent crude oil prices were up about 1%. Gasoline prices increased 1%. Gasoil prices fell 1% as did May heating oil future prices.- Grain prices were all higher. Chicago and Kansas City wheat prices rose between 1% and 2%, corn prices 3% and soybean prices about ½ percent.
- Spot gold prices fell 0.2%, spot silver prices rose 1.4% and spot platinum prices increased 3.9%. Palladium prices rose 2.6%.
- Base metal prices were all higher. Copper and aluminum prices increased 2%, zinc and lead prices increased 3% and nickel prices gained 6%.
- The Bloomberg Commodity Index increased 1.6% primarily due to gains in the energy, base metal and grains sectors.
- Very small net outflows from commodity ETPs last week with outflows from crude oil and broad commodity ETPs offset by inflows into gold, silver and energy (ex-crude oil) ETPs.
Commentary
Stock markets rose last week with value stocks outperforming growth stocks with expectations of further Fed tightening increased as the week progressed. The previous Friday’s robust job report helped boost cyclical/value stock prices while adding to expectations Fed rate hikes would continue through at least May, hurting growth/tech stock prices. This sentiment was reinforced by Wednesday’s CPI release showing cooling-but-still-stubbornly-high inflation with value stock prices benefiting over growth stock prices. FOMC minutes, also released Wednesday, did the same. While Thursday’s lower-than-expected PPI release moved all 3-major indexes higher (with the Nasdaq Composite increasing the most), Friday’s comments from Fed officials calling for higher rates mitigated those moves, sending index levels lower. Changes in Treasury rates reflected growing expectations of more Fed rate hikes with the 10-year Treasury rate increasing 21bps. 10-year real rates were the primary reason for the increase, rising 15bps. The U.S. dollar, weaker 0.8% through Thursday, strengthened 0.6% Friday (following comments from Fed officials). For the week, the S&P 500 Index increased 0.8% to 4,137.64 the Nasdaq Composite Index rose 0.3% to 12,123.46, the Dow Jones Industrial Average gained 1.2% to 33,885.31, the 10-year U.S. Treasury rate increased 21bps to 3.51% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 0.3%.
Oil prices moved higher last week but struggled against a backdrop of demand concerns. Prices moved lower to start the week, reflecting concerns that the previous Friday’s job report would incite a Fed rate increase in May, stifling demand. This sentiment reversed through Wednesday’s CPI release with increasing expectations of a Fed pivot following signs of cooling inflation. OPEC demand concerns, voiced Thursday, sent prices lower for the second and last time during the week while Friday’s IEA forecast of record demand (resulting from increased Chinese consumption) moved prices higher (despite hawkish comments from Fed officials). WTI prices ended the week up just over 2%. Natural gas prices (May futures contract) rose, climbing 5% higher on the week.
Spot gold prices ended the week lower but only after moving sharply lower Friday. Prices started the week lower, pressured by the previous Friday’s resilient job report adding to expectations the Fed would continue to tighten and raise rates 25bps in May. Those expectations lessened through Thursday as lower-than-expected CPI and PPI releases provided reason for increased expectations of a Fed pivot. Gold prices (up 1.5% through Thursday), however, fell sharply Friday following hawkish Fed officials’ comments. Silver and platinum prices also fell sharply Friday but fared better, ending the week up 1.4% and 3.9%, respectively.
Base metal prices rose on the week supported by cooling U.S. inflation and strong Chinese trade data. The increase came despite growing expectations of continued Fed rate increases in the face of a resilient jobs market and still-high inflation. Copper prices also were supported by falling Chinese inventory levels.
Grain prices finished higher last week. Wheat prices, lower through Thursday on favorable southern Plains weather forecasts and increased estimates of ending stock levels, rallied sharply Friday following reports Russia was not excited about extend the Black Sea export agreement. Corn prices also rose sharply Friday but also benefited from the poor condition of the U.S. hard red winter wheat crop and higher crude oil prices. Soybean prices, the laggard of the group, ended the week slightly higher with prices supported by lowered estimates of Argentina production but hurt by a large Brazilian crop and lower price levels.
Coming Up This Week
Another light data-week with focus on housing data and PMI manufacturing and composite indexes.
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.
