Commodities & Precious Metals Weekly Report: Jun 19
Posted:Key points
With the exception of natural gas prices, energy prices were all significantly higher last week. WTI and Brent crude oil prices rose 8.6% and 8.1%, respectively and gasoil, gasoline and heating oil prices increased 9.0%, 10.7% and 7.9%, respectively. Natural gas prices decreased 3.5%.
Grain prices were mixed with wheat prices falling and corn and soybean prices increasing. Chicago and Kansas wheat prices fell 4.5% while corn and soybean prices increased 0.8% and 0.1%, respectively.
Base metal prices were all higher with zinc prices gaining the most. Aluminum and copper prices rose 0.4%, nickel prices increased 0.8% and zinc prices gained 5.5%.
Gold prices moved slightly higher, increasing 0.1% and silver prices rose 2.2%. Platinum prices moved lower, falling 0.2%.
The Bloomberg Commodity Index increased last week, rising 1.36%. The energy sector was primarily responsible for the increase with precious and base metal sectors also contributing. The grains and livestock sectors were the only sectors that detracted from the index’s performance.
Total assets in commodity ETPs rose again last week, increasing $1,256.6m. Gold ($1,544.6m), silver ($79.4m), agriculture ($32.9m) and energy (ex-crude oil) ($14.6m) ETP inflows were partially offset by crude oil (-$391.9m) and broad commodity (-$29.7m) ETP outflows.
Commentary
Garnering support from the U.S. Federal Reserve Bank’s widening of its corporate buyback program to include individual bonds and much-stronger-than-expected retail sales and and industrial production reports, the S&P 500 increased almost 3% through Tuesday. Fed Chairman Jerome Powell’s testimony in front of the Senate and House on Tuesday and Wednesday imploring congress to continue its fiscal stimulus efforts as well as increased fears of a coronavirus second wave (exacerbated by the W.H.O’s proclamation that the coronavirus has entered a new and dangerous phase) pushed the S&P 500 lower the remainder of week. At week’s end the S&P 500 Index increased 1.9% to 3,097.74, the 10-year U.S. Treasury rate was unchanged at 0.70% and the U.S. dollar (as measured by the DXY Index) strengthened 0.3%.
A combination of lower global production, stepped-up OPEC+ compliance efforts, IEA forecasts of a large increase in oil demand in 2021 and signs of reduced U.S.-China trade frictions moved WTI oil prices (September futures) almost 9% higher on the week despite increasing concerns surrounding a coronavirus second wave.
Base metal prices moved higher through Thursday on falling LME inventory levels (brought about by increased Chinese demand) and increased expectations of both EU and U.S. fiscal stimulus packages. Most base metal prices decreased on Friday as result of increased concerns regarding Beijing lockdowns and restrictions and following the W.H.O’s warning of a new and dangerous coronavirus phase.
Gold and silver prices, lower on through Thursday with increased expectations of rebounding global economies, moved sharply higher on Friday as result of increased concerns regarding the number of coronovirus cases and restrictions in Beijing and following the W.H.O’s pronouncement of a new and dangerous coronavirus phase. Gold and silver prices continue to be supported by unprecedented central bank monetary stimulus.
Soybean prices edged higher on continued China buying while corn prices moved higher with oil prices and expectations of increased ethanol demand. Wheat prices fell to their lowest levels since last September suffering from increased expectations of U.S. and European harvests and weaker-than-expected export demand.
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Coming up this week
- Somewhat light data week with home sales reports and durable goods and PMI composite flash releases highlighting the week.
- Existing home sales on Monday.
- PMI composite flash and new home sales on Tuesday.
- Durable goods orders, 2nd quarter final GDP estimate, international trade in goods and jobless claims on Thursday.
- EIA petroleum report on 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.
