Commodities & Precious Metals Weekly Report: Jul 8
Posted:
Key points
Energy prices, except for natural gas prices, were all lower last week. WTI and Brent crude oil prices fell 4% and heating oil gasoline prices dropped 7%. Natural gas prices rose 4.5%.- Grain prices were moved higher last week. Wheat prices rose between 3.5% and 5.5% and corn prices increased just over 2%. Soybean prices were practically unchanged.
- Precious metal prices were mixed. Spot gold prices fell 3.8% and spot silver prices lost 2.8%. Spot platinum prices rose 0.6%.
- Base metal prices were mostly lower. Copper and nickel prices fell 2.3% and 1.2%, respectively and aluminum prices decreased 0.4%. Zinc prices rose 2.4%.
- The Bloomberg Commodity Index decreased 1% with the energy and precious metals sectors responsible for the decline. The agricultural sector increased over the week, offsetting index losses.
- Almost $3 billion outflows from commodity ETPs last week. Gold (-$1,184m) ETP outflows accounted for almost 40% of the total outflows followed by broad commodity (-$915m) and silver (-$466m) ETP outflows. Agriculture ETPs saw $222 million outflows. No sector had inflows last week.
Commentary
Stock markets moved higher last week with all 3 major stock indexes posting gains. The Nasdaq Composite Index strongly outperformed the S&P 500 Index and the Dow Jones Industrial Average, boosted by strong tech stock performance. Risk-on sentiment combined with growing expectations inflation my have peaked drove stock prices higher through Thursday. Wednesday’s FOMC minutes release confirmed the Fed’s commitment to fight inflation even at the risk of recession, spurring stock prices - especially tech stock prices – higher as inflation concerns mitigated. Friday’s stronger-than-expected Non-Farm payroll report somewhat renewed inflation concerns and increased expectations of aggressive Fed tightening but also contributed to the belief the economy may be strong enough to avoid a recession even in the face of concerted Fed action. The 10-year Treasury rate increased 19bps last week driven almost entirely by higher real rates. 10-year inflation expectations were almost unchanged at 2.37%. At week’s end, the S&P 500 Index gained 1.9% to 3,899.38, the Nasdaq Composite Index rose 4.6% to 11,635.31, the Dow Jones Industrial Average increased 0.8% to 31,339.20, the 10-year U.S. Treasury rate increased 19 bps to 3.08% and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY) strengthened 1.7%.
Oil prices ended the week lower but well off of Wednesday’s low. Recession fears combined with concerns of new Chinese Covid-related restrictions drove oil prices 8% to 9% lower Tuesday followed by another 2% move lower Wednesday. While oil inventories increased much more than expected (due mainly to SPR releases), gasoline and distillate inventories fell much more than expected, pushing oil, gasoline and heating oil prices over 5% higher Thursday. Oil prices continued their move higher Friday in part supported by a stronger-than-expected Non-Farm Payroll report.
Gold and silver prices moved lower last week, falling on recession concerns in the face of prospective aggressive Fed tightening and markedly stronger U.S. dollar. Spot gold prices ended the week down almost 4% with all of the move lower occurring Tuesday and Wednesday. Similarly, the U.S. dollar ended the week nearly 2% stronger with all the strengthening occurring Tuesday and Wednesday. .
Base metal prices were mostly lower last week, pressured by increased global recession fears, new Chinese Covid-related restrictions and a stronger U.S. dollar. Copper prices tumbled 5% Tuesday reacting to reports of mass Covid testing in Shanghai as well as increased recession concerns powered by soaring natural gas prices in Europe. Reports of Chinese stimulus Thursday pushed copper prices almost 5% higher, reversing most of Tuesday’s losses. For the week, copper prices dropped 2 ¼ percent. Zinc prices bucked the trend, increasing almost 2.5% on falling inventory levels.
Grain price moved higher last week climbing higher from sharply lower prices Tuesday. Fund liquidations were attributed to Tuesday’s declines with wheat, soybean and corn prices all falling near 5%. Sharply lower soybean oil prices (down 8% Tuesday) also pressured soybean prices lowers. Falling crop ratings and dryer-adverse-weather forecasts along with fund buying reversed all and more of Tuesday’s losses with wheat prices, for example, gaining more than 10% over Thursday and Friday. Soybean oil prices ended the week down 3%.
Coming up this week
CPI (Wednesday) and PPI (Thursday) are the big releases this week.- CPI and Beige Book on Wednesday
- Jobless Claims and PPI on Thursday.
- Retail Sales, Industrial Production and Consumer Sentiment 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.
