Commodities & Precious Metals Weekly Report: Aug 25
Posted:
Key points
Energy prices were mixed. Oil and natural gas prices fell about 1%. Gasoil prices rose 2%, heating oil prices gained 4% and gasoline prices increased 1%.- Wheat prices were mixed with Kansas City wheat prices increasing ½ percent and Chicago wheat prices falling 3%. Corn prices fell 1%. Soybean prices increased 3%.
- Spot gold prices increased 1%, spot silver prices jumped 7% higher and platinum prices rose 4%.
- Aluminum, lead and copper prices increased 1%. Zinc and nickel prices gained between 3% and 4%.
- The Bloomberg Commodity Index increased 1.3%, rising primarily on gains in the precious and base metals sectors as well as gains in the softs sector.
- More commodity ETP outflows. Gold outflows accounted for the majority followed by silver and crude oil outflows. Energy (ex-crude oil) ETPS saw the only inflows.
Commentary
Stock markets rose last week, with the 2 of the 3 major market indexes registering gains with somewhat large disparity between index returns. Uncertainty ruled early week trading with investor awaiting Nvidia’s earnings report Wednesday (after the close) and Fed Chair Powell’s Jackson Hole speech Friday. Macy’s poor earnings report Tuesday, adding to concerns regarding consumer strength, helped pressure markets lower. Wednesday’s much better-than-expected Toll Brothers’ results (indicating surprisingly strong home building strength despite the high level of mortgage rates) along with generally positive Nvidia expectations pushed all 3 index levels at least ½ percent higher. Though Nvidia’s earnings report beat expectations (sending the stock almost 10% higher after hours Wednesday), markets fell more than 1% Thursday (Nvidia ended the day practically unchanged), besieged by growing concerns of the wherewithal of the economy following much weaker-than-expected durable goods orders. Lower-than-expected jobless claims, indicating a still-resilient job market, added to those concerns by increasing expectations of continued Fed tight monetary policies. Powell’s comments Friday overall appeared to buoy markets, leaving investors with expectations the Fed would remain vigilant in its fight against inflation but act with caution. 10-year Treasury rates, reflecting investor uncertainty early last week, rose noticeably Tuesday only to fall sharply Wednesday to end the week about 2bps lower. For the week, the S&P 500 Index increased 0.8% to 4,405.71, the Nasdaq Composite Index climbed 2.3% to 13,590.65, the Dow Jones Industrial Average decreased 0.5% to 34,346.96, the 10-year U.S. Treasury rate decreased 2bps to 4.23% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) strengthened 0.8%.
Oil prices finished the week lower again, falling through mid-week and then rising Thursday and Friday. Weaker-than-expected Chinese stimulus measures along with weaker-than-expected business activity in the U.S., the euro zone and Japan, helped push oil prices 2% lower through Wednesday. Falling gasoil stocks (pushing both gasoil and diesel/heating oil prices sharply higher), moved oil prices higher to finish the week well off intraweek lows. Gasoil prices ended the week up 2% and heating oil prices rose nearly 4%.
Spot gold prices rose last week (up almost 1.5%), rising in front of Fed Chair Powell’s Friday Jackson Hole speech with investors seemingly expecting more accommodating Fed monetary policy going forward. Gold prices rose every day but Friday last week, moving almost 1% higher Wednesday following a much weaker-than-expected PMI Composite Index. Thursday’s sharp drop in durable goods orders also supported gold prices offsetting lower-than-expected initial jobless claims. Powell’s speech Friday seemed to align with market expectations with Powell reiterating the need to remain vigilant but to act carefully going forward. Silver and platinum prices increased markedly more than gold prices, moving higher with base metal prices.
Copper prices moved about a percent higher last week, bolstered mainly by stronger-than-expected Chinese demand. Chinese refined copper demand increased 9% through June despite expectation of falling demand due to China’s struggling property sector. A weaker U.S. dollar versus the Chinese yuan also supported prices with China aggressively intervening to support the yuan.
Corn prices finished the week lower, affected mainly by projections of better-than-expected yields throughout the corn belt. Forecasts for hot, dry weather, however, worked to floor losses. Soybean prices moved higher, reacting to indications to lower-than-expected to yields, good export number and hot, dry weather forecasts. Wheat prices were mostly lower pressured by weak exports, growing estimates of Russia’s harvest and the possibility of a Ukraine shipping corridor.
Coming Up This Week
Busy week highlight by GDP Wednesday, the PCE Price Index Thursday and the Employment Report 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.
