Commodities & Precious Metals Weekly Report: Jul 21
Posted:
Key points
Energy prices all moved higher. WTI and Brent crude oil prices increased 2%. Heating oil and gasoline prices rose 6% and 7%, respectively. Gasoil prices increased 5%.- Wheat prices rose between 4% and 5%, corn prices increased 4% and soybean prices gained 2%.
- Spot gold prices rose less than ½ percent. Spot silver and platinum prices fell 1%.
- Aluminum, copper and zinc prices fell 3% and nickel prices lost 4%. Lead prices increased 1%.
- The Bloomberg Commodity Index rose 1.6%. Most of the increase was attributable to the energy sector, followed by the grains sector. The base metals sector detracted from last week’s performance.
- Inflows last week, all from Gold ETPs partially offset by silver and broad commodity ETPs outflows.
Commentary
Stock markets moved higher again last week though major indexes diverged with the Dow Jones Industrial Average markedly outperforming the Nasdaq Composite and S&P 500 Indexes. All 3 indexes moved sharply higher through Wednesday, rising on strong big-bank earnings reports (from the previous week as well) and on solid regional bank results showing deposits had stabilized. (In fact, through Wednesday, the Nasdaq Composite Index had slightly outperformed the other 2 indexes.) A weaker-than-expected June retail sales release Tuesday increased expectations of less aggressive Fed monetary policy also supporting stock prices. Following disappointing earnings reports from TSLA, NFLX and TSMC, tech stocks moved substantively lower with the Nasdaq Composite Index finishing the day down 2%. Interestingly, Thursday’s better/lower-than-expected initial jobless claims renewed “higher-rates-for-longer” concerns, pushing 10-year Treasury rates and the U.S. dollar higher while at the same time propelling the Dow Jones Industrial Average ½ percent higher. For the week, the S&P 500 Index increased 0.7% to 4,536.34, the Nasdaq Composite Index fell 0.6% to 14,032.80, the Dow Jones Industrial Average rose 2.1% to 35,228.48, the 10-year U.S. Treasury rate increased 1bp to 3.84% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) strengthened 1.2%.
Initially moving lower on weaker-than-expected Chinese GDP growth, oil prices moved higher the remainder of the week to end the week up 2%. Prices recovered from Monday’s lows, rebounding on China announcing it would act to support economic growth and on increased expectations of less aggressive Fed monetary policy going forward following Tuesday’s weaker-than-expected retail sales release. Prices paused mid-week in reaction to higher-than-expected inventory levels (drawdowns less than expected) offset by seemingly strong Chinese demand (Chinese oil imports from Russia increased strongly). Prices bounced Friday, however, supported by growing supply concerns, Chinese plans to support automobile and electronics sales and an escalation in the Russia-Ukraine conflict.
Higher over 1% following Tuesday’s weaker-than-expected retail sales release, gold prices moved lower the remainder of the week to closing less than ½ percent higher on the week. Uncertainty surrounding this week’s FOMC meeting combined with better/lower-than-expected initial jobless claims Thursday, moved gold prices lower Thursday and Friday. Silver and platinum spot prices fell on the week, declining about 1%, moving lower with base metal prices.
Base metal prices moved lower again last week deflated by weaker-than-expected Chinese GDP growth. Chinese government announcements of additional stimulus to support economic growth (including plans to bolster electronic and automobile sales and mortgage rate easing) while initially moving prices higher, lost import with markets concerns the level of stimulus was insufficient and ineffective. Lead prices rose on the week. All other prices fell.
Grain prices moved higher last week predominantly due to Russia’s withdrawal from the Black Sea export agreement. Prices, especially Chicago wheat prices, closed the week off their Thursday’s highs, affected by favorable longer-term weather forecasts and increased estimates of Brazil second corn and U.S. spring wheat harvests. Wheat and corn prices also moved higher on Russia’s pronouncement freighters entering the Black Sea would be considered hostile and subject to attack.
Coming Up This Week
Another busy data week with all eyes on Wednesday’s FOMC announcement but also Thursday’s GDP and Friday’s PCE Price Index.
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.
