Commodities & Precious Metals Weekly Report: Mar 29
Posted:Key points
- Most energy sector components were higher last week. WTI and Brent crude oil prices increased 1.9% and 1.1%, respectively. Gasoil and heating oil prices rose 1.4% and 0.2%, respectively. Gasoline prices fell 0.4% and natural gas prices dropped 3.8%.
- The grain sector was the worst performing sector with all futures contract prices declining over the week. Corn prices decreased the most, dropping 5.8%. Kansas wheat prices fell 3.4% and Chicago wheat prices fell 1.8%. Soybean prices lost 2.2%.
- Base metal prices, except for nickel, rose last week with copper and zinc strongly outperforming. Zinc and Copper prices rose 3.3% and 4.2%, respectively. Aluminum prices were up 0.4% while copper prices fell slightly, declining 0.1%.
- Gold, platinum and silver prices all finished lower last week with gold prices decreasing 1.2%, platinum prices falling 0.4% and silver prices dropping 1.9%.
- Lean hog prices gave up some of their gains from the last few weeks, falling 7.5%.
- The S&P GSCI outperformed the Bloomberg Commodity Index last week with the S&P GSCI up 0.04% and the Bloomberg Commodity Index down 0.77%. The S&P GSCI’s larger exposure to energy but smaller exposure to natural gas, grains and precious metals was primarily responsible for its outperformance.
- Total assets in commodity ETPs rose $61.9m. Gold ($173.8m) ETP inflows were partially offset by broad commodity (-$39.2m), crude oil (-$47.4m) and precious metals (ex-gold and silver) (-$15.4m) ETP outflows.
Commentary
Continued concerns of U.S. economic growth negatively affected by lower global growth and statements of some Federal Reserve Bank officials indicating it’s too soon to consider lowering rates, limited U.S. stock market gains and helped push commodity markets lower through Wednesday last week. Thursday’s and Friday’s reports of lower-than-expected Q4 GDP, consumer spending and inflation were all but ignored after reports of good progress in U.S.-China trade negotiations. At week’s end the S&P 500 Index finished the week up 1.2%., the U.S. dollar strengthened 0.6% and the 10-year U.S. Treasury rate dropped 4bps to 2.40%. The Bloomberg Commodity Index ended the week down 0.8%, with gains attributed to increased optimism over a U.S.-China trade agreement offset by steep declines in grain prices.
Despite concerns of lower global growth, renewed tweets by President Trump pressing OPEC and Saudi Arabia to increase production, reports Russia was considering ending its alliance with and a larger than expected increase in U.S. inventories, WTI crude oil prices increased about 1.4%. OPEC’s and especially Saudi Arabia’s determination to maintain or increase production cutbacks along with another decline in active U.S. oil rigs helped support prices. The reduction in active U.S. oil rigs this quarter was the greatest in three years while oil prices had their best quarter since 2009.
Pressured early in the week by global growth concerns, base metal prices were supported by continued supply shortage concerns and renewed optimism over a U.S-China trade agreement. Copper prices had their best quarter since 2012.
Unchanged or slightly higher through Wednesday, gold prices moved lower with a strengthening U.S. dollar, as the 10-year U.S. Treasury rate moved off its low and fears of a U.S. recession diminished. Silver and platinum prices moved lower with gold prices.
Corn, wheat and soybean prices all fell on concerns of increased supply. Corn supplies are forecasted to increase with reports that many farmers switched from soybeans to corn as a result of U.S. – China trade frictions. Wheat prices, pressured by increased global supplies, had their worst quarter since late 2017.
Lean hog prices dropped 7.5% last week, reversing some of their large gains from in past weeks as a result of reduced fears of the extent of swine fever in China and the rest of Asia.
Coming up this week
- Light data week capped off by the employment situation report on Friday.
- Retail sales and ISM manufacturing index on Monday.
- Durable goods orders on Tuesday.
- ISM non-manufacturing index on Wednesday.
- Jobless claims on Thursday.
- Employment situation report on Friday.
- 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.
