Commodities & Precious Metals Weekly Report: Jun 4
Posted:
Key points
Energy prices were sharply higher last week. Brent crude prices broke $70/barrel, increasing 4.5% on the week and WTI crude prices increased 5.0%. Gasoline and natural gas prices rose 3.5%.- Grain prices were sharply higher as well. Wheat and corn prices increased just under 4% and soybean prices rose 3.5%. Soybean oil prices rose 8.5%.
- Base metal prices were all lower with copper prices falling the most. Copper prices fell just over 3%, zinc prices fell almost 3%, aluminum prices decreased 1% and nickel prices fell ½ percent.
- Precious metal prices all fell last week. Gold and silver prices fell ½ percent while platinum prices decreased just under 1%.
- The Bloomberg Commodity Index increased 2%, supported by higher energy and grain prices. The base and precious metal sectors detracted from the Index’s performance.
- Small net commodity ETP inflows last week with broad commodity and gold ETPs again responsible for the lion’s share of the inflows and crude oil and silver ETPs absorbing most of the outflows. Broad commodity ETP inflows amounted to $240 million and gold ETPs saw just under $90 billion inflows. Crude oil and silver ETPs had outflows of $90 million and $73 million, respectively.
Commentary
U.S. stock markets moved higher again last week with gains mainly coming Friday on a holiday-shortened trading week. Thursday’s better-than-expected jobless claims and President Biden’s retraction of his proposed corporate tax hike increased expectations of strong economic growth, higher inflation and, as a result, increased concerns the Fed may act sooner than later to pare its accommodative monetary policy, pushing all three major stock indexes lower. Those losses, however, were partially recouped Friday following a payroll report showing good but below-expectations job growth and an unchanged labor participation rate. 10-year U.S. Treasury rates were little changed on the week but experienced increased volatility moving higher one day and then lower the next throughout the week. At week’s end, the S&P 500 Index increased 0.6% to 4,229.89, the Nasdaq Composite Index increased 0.5% to 13,814.49, the Dow Jones Industrial Average rose 0.7% to 34,756.39, the 10-year U.S. Treasury rate fell 2bps to 1.56% and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY) strengthened 0.1%.
Oil prices continued their move higher last with Brent crude oil prices breaking $70/barrel. Lower-than-expected U.S. inventory levels, uncertainty regarding relaxation or removal of Iranian sanctions and OPEC+ signaling it expects growing oil demand to more than support its scheduled production increases combined to help move oil prices higher.
Gold prices ended the week lower with all of the price declines occurring Thursday. Higher through Wednesday, gold prices fell almost 2% Thursday after a much stronger-than-expected ADP private payroll report and after jobless claims fell to a post-pandemic low. Thursday’s economic data increased expectations the Fed would tighten monetary policy sooner than later to combat growing inflation concerns, pushing gold prices lower. Friday’s weaker-than-expected payroll report eased inflation concerns and reduced expectations regarding the Fed, pushing gold prices 1% higher from Thursday’s lows.
Copper prices moved lower last week falling nearly 5% through Thursday on tightening financial conditions in China and prospective tightening of monetary policy from the Fed, the BoE and the ECB. Friday’s weaker-than-expected payroll report reversed some of copper’s driving copper prices higher by 1.5%. Aluminum, zinc and nickel prices all behaved similarly.
Another volatile week for grain prices this time with prices ending the week higher. Frost damage concerns from the previous weekend and forecasts of hot, dry weather in the northern Plains States, the Midwest and East Coast drove wheat and corn prices 4% to 5% higher Tuesday. Some of those gains were reversed Wednesday and Thursday with a bearish USDA crop progress report and as a result of improved weather forecasts. Grain prices moved lower with all other commodity prices on Thursday, reacting to increased expectations the Fed would need to tighten monetary policy sooner-than-later and then all moved higher on Friday following a weaker-than-expected payroll report.
Coming up this week
A light data-week accentuated by CPI and Jobless Claims on Thursday.- International Trade in Goods and Services on Tuesday.
- CPI and Jobless Claims on Thursday.
- Consumer Sentiment on Friday.
- EIA petroleum status 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.
