Commodities & Precious Metals Weekly Report: Aug 11
Posted:
Key points
Energy prices were higher. WTI and Brent crude oil prices increased about ½ percent, heating oil prices 2% and gasoil prices 3%. Natural gas prices jumped 9% higher and gasoline prices rose 4%.- Wheat prices fell 1% and corn and soybean prices lost 2%
- Spot gold and platinum prices decreased 2% and 1%, respectively. Silver prices fell 4%.
- Aluminum prices decreased 3% and nickel and copper prices fell 4%. Nickel prices dropped 5%. Lead prices fell 1%.
- The Bloomberg Commodity Index decreased 0.2%. Gains in the energy sector were offset by losses in the grains and base and precious metals sectors.
- Another week of outflows again predominantly from gold ETPs. Broad Commodity and Energy ETPs also experienced decent size outflows as well. Silver ETPs had the only sizeable inflows.
Commentary
Index performance diverged last week with the Nasdaq Composite noticeably underperforming the Dow Jones Industrial Average and the S&P 500 Index. The Dow Jones Industrial Average was the only index to end the week with a gain though the S&P 500 Index finished the week slightly lower, falling a bit more than ¼ percent. Downward pressure on stocks seemed to come from, 1) concerns the Fed will keep rates higher for longer, 2) a faltering Chinese economy and 3) renewed concerns surrounding regional bank health following Moody’s credit-rating downgrade of 10 regional banks. Current interest rate levels may also be detracting from stock market performance with bonds providing a more attractive alternative investment. Thursday’s better-than-expected CPI release momentarily pushed markets higher, fueling hopes the Fed will be less aggressive going forward, but those hopes were diminished Friday following a higher-than-expected PPI release. For the week, the S&P 500 Index fell 0.3% to 4,464.05, the Nasdaq Composite Index dropped 1.9% to 13,644.85, the Dow Jones Industrial Average rose 0.6% to 35,281.47, the 10-year U.S. Treasury rate increased 12bps to 4.16% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) strengthened 0.8%.
Another up-and-down week for oil prices with prices continuing to move higher, though only slightly. Flip-flopping demand expectations were the primary impetus for the vacillations with concerns of continued high rates dimming economic growth competing against projections (by the EIA) of strong U.S. GDP growth and forecasts of record oil demand (by the IEA). Weak Chinese economic data (plunging new bank loans and weak trade data) also increased demand concerns. While oil prices rose less than ½ percent last week, gasoline prices rose about 4% and natural gas prices gained 9%. Falling natural gas inventory levels and hot-weather forecasts contributed to the increase in natural gas prices while gasoline prices benefited from a larger-than-expected drawdown in inventory levels.
Spot gold prices moved lower again last week (down 1%), once again reacting to higher Treasury rates and a stronger U.S. dollar. Concerns the Fed will leave rates higher for longer have helped move Treasury rates higher and strengthened the U.S. dollar. Thursday’s better-than-expected CPI release did little to allay concerns with Friday’s worse-than-expected PPI release perhaps increasing them. Platinum prices moved with gold prices. Silver prices declined more sharply.
Copper prices moved lower again last week as well, adversely affected by rising rates, a stronger U.S. dollar and a faltering Chinese economy. Weak Chinese trade data and sharply declining new Chinese bank loans added to demand concerns pushing copper and other base metal prices lower. A stronger U.S. dollar, bolstered by increased expectations of higher rates for longer (despite a better-than-expected CPI release) also weighed on prices.
Initially higher on increased Ukraine-Russia tensions, wheat prices finished the week about 1% lower, falling on favorable weather and increased inventory projects in Friday’s USDA WASDE report. Corn and soybean prices trended lower throughout the week on favorable weather but also on weak exports and, for soybeans, falling meal and bean oil prices.
Coming Up This Week
Quiet week with CPI, on Thursday, the attention getter
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.
