Commodities & Precious Metals Weekly Report: Nov 11
Posted:
Key points
Energy prices were all lower. WTI and Brent crude oil and gasoline prices decreased between 2.5% and 3.5% while heating oil and natural gas prices fell 7%. - Grain prices were lower, too. Wheat prices fell between 1.5% and 3.5%, corn prices lost 3.5% and soybean prices moved 1% lower.
- Spot gold, silver and platinum prices were all sharply higher. Spot gold prices rose 5.4%, spot silver prices increased 4.2% and spot platinum prices climbed 7.5%.
- Base metal prices were up as well. Aluminum, copper and zinc prices rose between 4.5% and 6%. Nickel prices jumped 13%.
- The Bloomberg Commodity decreased 0.4%. Energy and grains sector losses were partially offset by gains in the base and precious metals sectors.
- Very small outflows from commodity ETPs last week. Silver (-$111m) ETP outflows were offset by crude oil ($108m) ETP inflows.
Commentary
Major stock market indexes moved sharply higher last week, surging Thursday following the release of much better-than-expected CPI data. Up between 1.5% and 2% through Tuesday on projections mid-term elections would provide a split Congress, stock indexes fell 2% or more Wednesday on uncertainty surrounding mid-term election results and cryptocurrency-related turmoil. The liquidity crises enveloping FTX worsened severely after Binance walked away from acquiring FTX (leading to its filing for bankruptcy) and pushed bitcoin below $16,000. Indexes surged Thursday, however, reacting to a lower-than-expected core and overall CPI release. Expectations of a less aggressive Fed and a 50bp rate hike in December (down from expectations of 75bps) propelled the Nasdaq Composite Index over 7% higher Thursday (the S&P 500 Index and Dow Jones Industrial Average gained 5.5% and 3.7%, respectively) and bitcoin reversed all its Wednesday losses. Indexes continued to move higher Friday on Thursday’s momentum. The 10-year Treasury rate, only slightly lower through Wednesday, fell 29bps Thursday (bond markets were closed Friday due to Veterans Day) following better-than-expected CPI data and the U.S. dollar fared similarly, sharply weakening Thursday and Friday. At week’s end, the S&P 500 Index rose 5.9% to 3,992.93, the Nasdaq Composite Index jumped 8.1% to 11,323.22, the Dow Jones Industrial Average increased 4.1% to 33,419.18, the 10-year U.S. Treasury rate dropped 35bps to 3.81% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 4.1%.
WTI crude oil prices fell over 7% through Wednesday, battered by rising U.S. oil inventories, ongoing Chinese Covid-related restrictions and uncertainty surrounding U.S. mid-term election results. Thursday’s better-than-expected CPI release helped move prices about 1% higher on hopes of less-aggressive Fed policy going forward and on a sharply weaker U.S. dollar. Reports Friday of China relaxing Covid curbs powered prices higher with WTI crude oil prices jumping nearly 3%. Natural gas prices ended the week 7% lower amid heightened volatility. Natural gas prices rose 7% Monday, fell over 14% Wednesday and Thursday, increased 6% Thursday and then declined 5% Friday. Prices were buffeted by growing power outage expectations due to Tropical Storm Nicole, lower-than-expected inventory build and sub-freezing weather forecasts.
Spot Gold prices advanced almost 5.5% last week, pushed higher through Tuesday on a weaker U.S. dollar. Prices moved slightly lower Wednesday on a stronger U.S. dollar but moved sharply higher Thursday and Friday as the U.S. dollar markedly weakened following a better-than-expected CPI report. Silver and platinum prices followed gold prices higher.
Base metal prices moved higher last week. Copper prices were supported by low inventory levels, reports China would be moving away from its zero-tolerance Covid policy and by a sharply weaker U.S. dollar. Thursday’s better-than-expected CPI release increased expectations of a less aggressive Fed, markedly weakening the U.S. dollar and supporting all base metal prices.
Grain prices finished lower last week, moving lower every single day except Friday. Weak export demand was the primary driver for lower prices with the USDA WASDE report, released Wednesday, providing no real impetus for price movements. Prices moved higher Friday following reports China would be moving away from its zero-Covid policy.
Coming up this week
Housing data and PPI are in focus this week- PPI on Tuesday.
- Retail Sales, Housing Market Index on Wednesday.
- Housing Starts, Jobless Claims, Phil Fed Mfg Index on Thursday.
- Existing Home Sales 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.
