Commodities & Precious Metals Weekly Report: Dec 01
Posted:
Key points
Energy prices moved lower last week. WTI and Brent crude oil prices fell 2%, heating oil and gas oil prices dropped 3% and gasoline prices lost 1%. Natural gas prices fell 6%.- Grain prices were mixed. Wheat prices rose 5% and soybean prices increased ½ percent. Corn prices fell ½ percent. Soybean meal prices dropped 5% while soybean oil prices gained 2%.
- Spot gold prices rose 3%, spot silver prices gained 5% and platinum prices increased less than ¼ percent.
- Base metal prices were mixed. Copper and nickel prices increased 3% and 6%, respectively. Aluminum prices decreased less than ½ percent, zinc prices lost 2% and lead prices dropped 4%.
- The Bloomberg Commodity Index increased 0.2%. Gains in the precious and base metals and grains sectors were largely offset energy sector losses.
- Net outflows last week, mainly from gold, silver and broad commodity ETPs. Small inflows into energy ETPs.
Commentary
All 3 major stock market indexes moved higher last week with the Dow Jones Industrial Average strongly outperforming both the Nasdaq Composite and S&P 500 Indexes. The primary impetus for the move higher was increased expectations (driven by dovish Fed officials’ – especially from Jerome Powell – comments) of “peak rates” and a Fed pivot (rate cut) beginning early next year. 10-year Treasury rates, as a result, continued their move lower, finishing the week over 25bps lower, with almost all the move coming from falling 10-year real rates. A mixture of strong and weak economic data (e.g., greater-than-expected GDP growth, falling home sales and weaker manufacturing activity) combined with a better-than-expected PCE Price Index release (i.e., lower inflation than expected) seemed to bolster expectations of the soft-landing scenario adding to risk-on sentiment. For the week, the S&P 500 Index rose 0.8% to 4,594.63, the Nasdaq Composite Index increased 0.4% to 14,305.03, the Dow Jones Industrial Average gained 2.4% to 36,345.50, the 10-year U.S. Treasury rate fell 26bps to 4.21% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 0.1%.
Oil prices moved higher through Wednesday, buoyed by expectations of added OPEC+ production cuts (OPEC+ met November 30) and supply/export disruptions due to a severe storm in the Black Sea region. Up 3% through Wednesday, prices dropped about 5% over Thursday and Friday with markets disappointed by the nature of OPEC+ cutbacks (announced cuts were voluntary), a larger-than-expected increase in U.S. inventory levels and by record U.S. production.
Spot gold prices continued to rise last week, benefiting from increased expectations of a “sooner-than-expected” Fed pivot, falling longer-term Treasury rates and a slightly weaker U.S. dollar. Interestingly, Thursday’s PCE Price Index release, showing lower-than-expected inflation, resulted in a stronger U.S. dollar and lower gold prices, seemingly reflecting market uncertainty regarding future Fed monetary policy. Friday’s comments by Fed Chair Jerome Powell, however, all but admitting its reluctance to raise rates further, pushed gold prices sharply higher. Silver and platinum prices also rose last week, with silver prices outperforming and platinum prices underperforming gold prices.
Copper prices moved higher last week as well. Prices, initially lower Monday on much weaker-than-expected Chinese industrial profits, rose the remainder of the week on BoC statements promising accommodative monetary policy to help improve the economy, continued supply/mining disruptions and stronger-than-expected Chinese factory activity as reported by the Caixin Survey Friday.
Wheat prices outperformed soybean and corn prices last week, benefiting from short covering (oversold conditions), Black Sea storm-related shipping disruptions, reduced 2024 Russian crop estimates and concerns of rain-related Australian crop damage. Corn prices eked out a small gain on strong export data while soybean prices ended the week slightly lower on more favorable South American weather and falling soybean meal prices.
Coming Up This Week
Primary focus next week is Friday’s Jobs Report. Services and Composite PMI’s on Tuesday of interest as well.
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.
