Commodities & Precious Metals Weekly Report: Jun 9
Posted:
Key points
A mixed week for energy prices with crude oil prices lower and all other prices higher. WTI and Brent crude oil prices fell 2%. Natural gas and gasoline prices rose 4%. Heating oil prices were only slightly higher.- Grain prices were also mixed. Kansas City wheat prices were lower by 2% while Chicago wheat prices rose 2%. Soybean prices were up 3% and soybean oil prices surged over 10%. Corn prices were lower 1%.
- Spot gold, silver and platinum prices were all higher. Spot gold and platinum prices increased 1 and spot silver prices rose 3%. Spot palladium prices fell 7%.
- Base metal prices were mainly higher. Copper prices rose 2%, zinc prices increased 5% and lead prices gained 1%. Aluminum and nickel prices fell about ¼ percent.
- The Bloomberg Commodity Index increased 1.2%. All sectors had gains with the grains and metals sectors contributing the most.
- Larger net outflows from commodity ETPs last week, again mainly from gold but also from broad commodity, crude oil and agriculture ETPs. No significant inflows.
Commentary
As measured by the 3 major indexes, stock markets moved slightly higher last week with markets cautious before this week’s FOMC meeting and CPI release. Slightly weaker-than-expected economic data - including a weaker-than-expected ISM Services Index release and greater-than-expected initial jobless claims – helped increase expectations of a Fed pause while also diminishing concerns of a full-blown recession. Markets moved lower Wednesday with investor expectations of another Fed rate hike temporarily increasing following an unexpected rate increase by the Bank of Canada. Despite strong price performance by TSLA and NVDA last week, the Nasdaq Composite Index slightly underperformed both the Dow Jones industrial Average and the S&P 500 Index. (Small cap stocks, as measured by the Russell 2000 Index, strongly outperformed the 3 major indexes, increasing just under 2% on the week.) The change in 10-year Treasury yields moved slightly higher last week also seemingly waiting for this week’s CPI release and FOMC announcement. For the week, the S&P 500 Index increased 0.4% to 4,298.86, the Nasdaq Composite Index edged slightly higher, increasing 0.1% to 13,259.14, the Dow Jones Industrial Average rose 0.3% to 33,877.24, the 10-year U.S. Treasury rate increased 4bps to 3.74% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 0.4%.
Through mid-week, oil prices moved higher, supported primarily by Saudi Arabia’s plans to reduce output another 1 million bpd beginning in July. Much greater-than-expected builds in U.S. gasoline and diesel/heating oil inventories combined with weaker-than-expected Chinese economic data helped pull prices lower the remainder of the week with WTI crude oil prices finishing the week down over 2%. Reports Thursday of a U.S.-Iran nuclear agreement also pressured prices lower.
Spot gold, silver and platinum prices all moved higher last week, propelled by growing expectations of a “no-rate-hike” announcement at this week’s FOMC meeting and weaker-than-expected U.S. economic data. A weaker U.S. dollar also supported prices. Weaker-than-expected Chinese economic data, conversely, may have capped gains due to concerns of diminishing Chinese gold demand. Spot palladium prices fell almost 7%, reaching 4-year lows, continuing their decline on the back of reduced demand concerns.
Copper prices moved higher last week overcoming weaker-than-expected Chinese economic data and scaled back expectations of Chinese fiscal and monetary stimulus. Copper prices benefited from increased expectations of a Fed pause, lowered expectations of a U.S. recession and a weaker U.S dollar.
Grain prices were mixed with Soybean prices increasing the most. Soybean prices moved higher, despite a neutral WASDE report Friday, pushed higher by soaring bean oil prices (up over 10%). Chicago wheat prices moved higher supported by Russia-Ukraine conflict escalations and expectations of declining Australian production due to El Nino related weather. Corn prices moved slightly lower mainly due to favorable weather forecasts and lower demand forecasts from Friday’s WASDE report.
Coming Up This Week
CPI (Tuesday) and Wednesday’s FOMC announcement dominate this week’s data calendar. Thursday’s slew of releases are also of note, including jobless claims and retail sales.
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.
