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Commodities & Precious Metals Weekly Report: Dec 17

Topic: Commodities
Publication Type: Market Commentaries
Commodities & Precious Metals Weekly Report: Dec 17

Key points

  • Energy prices moved lower last week with natural gas prices falling the most. WTI and Brent crude oil prices decreased between 1.25% and 2%. Gasoline and heating oil prices fell 0.8% and 1.4%, respectively.  Natural gas prices fell 6.7%.
  • Grain prices were mainly higher with Chicago wheat prices the only exception. Kansas wheat and corn prices rose 0.6% and soybean prices increased 1.1%. Chicago wheat prices fell 1.3%.
  • Precious metal prices were mixed. February gold and silver futures prices rose 1.1% and 1.5%, respectively. Platinum prices decreased 1.1%.
  • Base metal prices were mainly higher as well. Aluminum prices jumped 4.6% higher and zinc prices rose 1.8%. Copper prices increased 0.2% while nickel prices fell 0.4%.
  • The Bloomberg Commodity Index decreased ½ percent, hurt by falling energy prices. All other sectors had positive performance.
  • $750 million commodity ETP outflows last week all from gold     (-$317m), crude oil (-$212m) and silver (-$182m) outflows.  Only small inflows and outflows in the remaining sectors.


U.S. stock prices moved lower with all 3 major stock indexes decreasing every day last week except for Wednesday.   Tech stocks sharply underperformed last week as evidenced by the Nasdaq Composite Index which fell almost twice as much as the Dow Jones Industrial Average.   Uncertainty surrounding the outcome of the 2-day FOMC meeting ending Wednesday, exacerbated by Tuesday’s record high PPI release, and concerns regarding the increase in the number of Omicron infections, pushed markets 1% to 1.5% lower through Tuesday.  Following Wednesday’s FOMC announcement that the rate of tapering would be doubled along with a dot-plot projection of three 25bp rate increases in 2022, stock prices moved sharply higher.  Wednesday’s “buy-the-fact” rally, however, was short lived as investors re-examined the potential consequence of tighter monetary policy going forward, pushing markets lower and furthering the rotation from tech/growth stocks into value stocks.    The 10-year U.S. Treasury rate also moved lower on the week, mainly due to falling inflation expectations in light of more aggressive Fed tightening. For the week, the S&P 500 Index decreased 1.9% to 4,620.64, the Nasdaq Composite Index fell 2.9% to 15,169.68, the Dow Jones Industrial Average decreased 1.7% to 35,366.56, the 10-year U.S. Treasury rate fell 7bps to 1.41% and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY) strengthened 0.5%.

Oil prices moved lower last week with all the decline occurring Friday.  Lower through Tuesday on uncertainty surrounding the 2-day FOMC meeting ending Wednesday and on increasing Omicron cases, WTI crude oil prices increased more than 2% over Wednesday and Thursday, following Wednesday’s FOMC announcement and EIA report showing a much greater-than-expected decline in U.S. oil inventory levels.  The Fed’s upbeat assessment of the U.S. economy announced in concert with its increased rate of tapering, also helped support oil prices.   Increased Omicron concerns stemming from growing cases and uncertainty of vaccine effectiveness pushed WTI crude oil prices almost 2% lower Friday.  Forecasts shale oil production will reach a record high in January also pressured prices lower.    Natural gas prices fell almost 7% over the week.  Continued mild-weather forecasts and rising supply as a result of increased shale production helped move prices lower.

Gold prices rose last week despite Wednesday’s FOMC announcement the Fed would be doubling the reduction in its bond buyback program.   Down over 1% through Wednesday, gold prices jumped almost 2% higher over Thursday and Friday, rallying on relief the Fed had acted as expected as well as on growing Omicron concerns.  10-year U.S. real rates fell 7bps Thursday, reflecting investor expectations of the continued need for easy-money monetary policies, also supporting gold prices.   

Lower through Wednesday on increased LME inventory levels, Omicron concerns and uncertainty surrounding central bank monetary policy in the UK, EU and the U.S., base metal price rose sharply Thursday on the Fed’s upbeat assessment of the U.S economy and zinc, aluminum and copper supply concerns. Nystar’s announcement it would curtail zinc production in France beginning January due to high energy prices,  Peru’s copper mine production problems and China’s reduced Aluminum output – also due to high energy costs - helped moved base metal prices higher Thursday and Friday.    

Corn and soybean prices moved higher last week supported by strong export numbers and continued adverse-weather forecasts for South America.  Wheat prices moved lower mainly due to a bumper Australian crop and but also as a result of increased Black Sea supply.

Coming up this week    

  • Decent holiday-shortened data week with all data on Wednesday and Thursday.
  • GDP, Consumer Confidence, Business Inventories and Existing Home Sales on Wednesday.
  • Durable Goods Orders, Jobless Claims, Personal Income and Outlays, New Homes Sales and Consumer Sentiment on Thursday.
  • EIA Petroleum Status Report Wednesday and Baker-Hughes Rig Count on Thursday.