Commodities & Precious Metals Weekly Report: Aug 26
Posted:
Key points
Energy prices were mainly higher last week with crude oil, gasoil and heating oil prices rising and natural gas and gasoline prices falling. Crude oil prices were up about 3%, gasoil prices rose almost 8% and heating oil prices gained 7%. Gasoline prices fell 3% and natural gas prices declined ½ percent.- Grain prices were all higher. Wheat and soybean prices rose 4% and corn prices climbed 7%.
- Precious metal prices were lower with spot gold and silver prices decreasing about ½ percent. Spot platinum prices fell 3%.
- Base metal prices, with the exception of nickel prices, were higher. Zinc and aluminum prices rose 2% and 5%, respectively, while copper prices increased 1%. Nickel prices fell 3%.
- The Bloomberg Commodity Index increased 1.9% primarily due to base metal and energy sectors positive performance. The precious metals and livestock sector were the only negatively performing sectors.
- $456 million outflows from commodity ETPs with about half coming from gold ETP outflows. and the other half from silver and crude oil ETP outflows. Broad commodity ETPs had small inflows.
Commentary
Amidst uncertainty surrounding Fed Chairman Powell’s Jackson Hole speech Friday, all 3 major stock market indexes moved slightly lower through Thursday, falling between ½ percent and a little over a 1 percent. Powell’s comments Friday affirmed the Fed’s intent to maintain its vigilance against inflation, knocking all 3 major stock market indexes lower by 3% or more. The move lower Friday came despite indications of peaking inflation and a slowing economy with the PCE Price Index (the Fed’s preferred inflation measure) increasing less than expected, durable goods orders less than expected and with the composite PMI declining further below 50. The 10-year Treasury, interestingly, moved only slightly higher, rising 5bps on the week mainly due to higher 10-year real rates. For the week, the S&P 500 Index fell 4% to 4,057.66, the Nasdaq Composite Index dropped 4.4% to 12,141.71, the Dow Jones Industrial Average declined 4.2% to 32,282.80, the 10-year U.S. Treasury rate rose 5bps to 3.03% and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY) strengthened 0.6%.
Battling concerns of slowing global growth, renewed Iran exports and falling U.S. gasoline demand, oil prices moved higher last week following warnings by Saudi Arabia and the UAE that OPEC+ could cut production to bolster prices. Slowing business activity in the U.S., Europe and China along with much lower-than-expected U.S. gasoline demand pushed oil markets sharply lower during trading hours only to see those losses reversed after warnings by OPEC+ of production cutbacks. Friday’s Jackson Hole speech by Fed Chairman Powell seemed to have little effect on prices.
Up a little over ½ percent through Thursday, spot gold prices ended the week lower after falling almost 1 ¼ percent Friday following Fed Chair Powell’s Jackson Hole speech. Weak economic data (including contracting business activity in the U.S. Europe and China, falling home sales) and a weaker U.S. dollar buoyed gold prices through Thursday. Powell’s comments Friday affirming the Fed’s continuing vigilance against inflation, sent gold prices over a percent lower. Despite the move lower in gold prices, the 10-year U.S. Treasury rates rose only slightly, increasing 5bps with 10-year inflation expectations remaining practically unchanged. Spot silver and platinum prices moved lower with gold prices.
Base metal prices moved higher last week despite weak Chinese economic data and growing expectations of a euro zone recession. Early week data showing depressed economic activity in China was countered later in the week after China announced stimulus measures. Zinc and aluminum prices were bolstered by additional smelting cutbacks due to soaring energy costs. Nickel prices fell on growing inventory levels.
Grain prices were all higher led by corn prices. Continued drought conditions in the Midwest combined with strong export demand supported corn prices. Soybean prices also were bolstered by strong export demand while wheat prices benefited from increased tensions in Ukraine.
Coming up this week
Quiet data-week but accentuated by Friday’s Employment Report.- Consumer Confidence on Tuesday.
- Chicago PMI on Wednesday.
- Jobless Claims, Productivity and Mfg PMI and ISM Mfg PMI on Thursday.
- Employment Report and Factory Orders on Friday.
- EIA Petroleum Status Report Wednesday and Baker-Hughes Rig Count on 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.
