Commodities & Precious Metals Weekly Report: Apr 28
Posted:
Key points
Energy prices were all lower. Brent and WTI crude oil prices fell 1%, gasoline prices lost 2% and heating oil and gasoil prices gave up 4%. Natural gas prices decreased 1%.- Grain prices were all lower. Chicago and Kansas City wheat prices fell 6%, corn prices 5% and soybean prices 2%.
- Spot gold and silver prices increased less than ½ percent. Spot platinum and palladium prices dropped 4% and 6%, respectively.
- Base metal prices were lower, too. Copper and aluminum prices fell 2%, zinc prices lost 3% and nickel and lead prices decreased 1%.
- The Bloomberg Commodity Index fell 1.1% with the grains sector responsible for most of the decline and with the energy and base and precious metals sectors also contributing to the loss.
- A little over $200 million net inflows into commodity ETPs last week. Gold, silver and crude oil ETP inflows were partially offset by broad commodity ETP outflows.
Commentary
Major stock-market indexes moved slightly higher last week powered mainly by better-than-expected big-tech earnings reports. Markets struggled early in the week, however, following First Republic Bank’s earnings report detailing extremely large ($100 billion) deposit outflows as well as on consumer confidence falling to a 9-month low. Renewed concerns of systemic banking problems drove stock markets lower while increasing safe-haven demand for the U.S. dollar and U.S. Treasuries. Better-than-expected earnings reports from Meta Platforms and Microsoft boosted stock prices while weak guidance from Amazon helped to pressure prices lower. Thursday’s smaller-than-expected GDP release, overshadowed by META’s earnings report, worked to lower expectations of a Fed rate hike at next week’s FOMC meeting, supporting markets as well. Friday’s PCE Price Index release, while revealing cooling inflation overall, still showed somewhat resilient inflation with the core PCE Price Index level coming in as expected MoM but slightly higher on YoY basis, helped move stock indexes higher as well. First Republic Bank moved sharply lower Friday with growing expectations of FDIC involvement, mitigating broader market fallout. For the week, the S&P 500 Index increased 0.9% to 4,170.20, the Nasdaq Composite Index rose 1.1% to 12,200.07, the Dow Jones Industrial Average gained 0.9% to 34,098.95, the 10-year U.S. Treasury rate fell 14bps to 3.43% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 0.2%.
Initially higher on hopes of increased travel-related demand during Chinese holidays, oil prices then moved lower on concerns of slower U.S. economic growth compounded by expectations of continued Fed tightening. Sharply falling consumer confidence and weaker-than-expected Q1 GDP growth increased concerns of decreased oil demand, driving WTI crude oil prices 5% lower Tuesday through Thursday, falling over 3% alone on Wednesday. Prices rebounded Friday, however, on both supply and demand factors, with supply inhibited by falling U.S. and North Sea production amidst markedly strong U.S. fuel demand. For the week WTI and Brent crude oil prices decreased just under 1.5%.
Spot gold prices moved slightly higher last week, with most of the gains coming Monday and Tuesday mainly on the back of renewed banking system concerns (spurred by First Republic Bank’s report of $100 billion deposit outflows) but also on sharply declining consumer confidence. Prices fell Wednesday and Thursday on lessened bank system concerns, better-than-expected big-tech earnings reports, rising Treasury rates and despite a weaker U.S. dollar. Silver prices mimicked gold prices, finishing slightly higher while platinum and palladium prices fell sharply, declining 4% and 6%, respectively.
Copper prices end the week lower, falling through Tuesday on weak Chinese demand, increased supplies and a stronger U.S. dollar. Prices then partially rebounded the remainder of the weak supported by a weaker U.S. dollar, Chinese stimulus plans and, for the most part, an as-expected PCE Price Index release. Other base metal prices followed copper prices lower.
Grain prices all moved noticeably lower last week. Corn prices continued to suffer from weak exports (due to better Brazil pricing), improved weather forecasts and good planting progress. Wheat prices also fell on improved weather expectations, reports of 20% greater soft-red-wheat production versus last year as well as on increased estimates of acreage planted in Canada. Soybean prices fell on Brazil price undercutting and lower bean oil and meal prices. Prices for all grains were pressured lower by reports of fund selling.
Coming Up This Week
Busy data-week with most of the focus on the FOMC announcement Wednesday but also on Friday’s Employment Report and Monday’s and Wednesday PMI Mfg and services index releases.
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.
