Commodities & Precious Metals Weekly Report: Nov 3
Posted:
Key points
Energy prices, except for natural gas prices, moved lower again last week. WTI and Brent crude oil prices declined 5%, heating oil prices fell 2% and gasoline prices lost 4%. Natural gas prices rose 2%.- Grain prices were mixed. Chicago wheat and corn prices fell 1% while Kansas City wheat prices were unchanged. Soybean prices gained 2%.
- Spot gold prices were down 1%, silver prices rose about 1/3 percent and platinum prices rose 3%.
- Copper and aluminum prices increased 1% and zinc and lead prices rose 2%. Nickel prices fell 1%.
- The Bloomberg Commodity Index decreased 0.3%. Gains in the base and precious metals and softs sectors were offset by losses in the energy sector.
- Decent inflows into gold, broad commodity and crude oil ETPs. Smaller outflows from silver and energy (ex-crude oil) ETPs.
Commentary
Major stock indexes notched impressive gains last week with the Nasdaq Composite index rising nearly 7%, the S&P 500 gaining almost 6% and the Dow Jones Industrial average climbing 5%. The gains came partially on the back of better-than-expected corporate earnings but mostly from increased expectations the Fed was done hiking rates. The FOMC left rates unchanged, as expected, but subsequent comments from Fed Chair Powell suggesting higher long-term rates may alleviate the need for further rate increases lifted expectations of a Fed monetary policy pivot and set the stage for lower rates and significantly increased risk-on sentiment. Wednesday’s refunding announcement, with issuance more heavily weighted to short-term bills and notes than expected, helped move longer-term rates lower and, as a result, stock prices higher. Friday’s weaker-than-expected jobs report seemingly affirmed Fed-pivot expectations, again pushing rates lower and lifting – in its wake – stock prices. For the week, the S&P 500 Index rose 5.8% to 4,358.34, the Nasdaq Composite Index gained 5.5% to 13,478.28 the Dow Jones Industrial Average increased 5.1% to 34,061.32, the 10-year U.S. Treasury rate fell 26bps to 4.58% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 1.4%.
Oil prices fell every day but Thursday last week, reacting to both supply and demand concerns. Weak Chinese and euro zone economic data worked to lower demand expectations while record U.S. oil production and uncertainty about OPEC production increased supply concerns. Reduced concerns Mid-East tensions would affect supply also moved prices lower. Interestingly, lower prices came despite a sharply weaker U.S. dollar and growing sentiment central bank rate hikes were all but done.
Spot gold prices fell last week but moved off intraweek lows set Wednesday. Prices moved lower in the first half of last week primarily on higher-rates-for-longer concerns with Fed Chair Powell’s comments Wednesday leaving open the possibility of future rate increases seemingly confirming those same concerns. Those concerns, however, significantly lessened Thursday (following the BoE’s announcement) and Friday (following a weaker-than-expected jobs report) pushing the U.S. dollar and 10-year Treasury rates markedly lower and concomitantly moving gold prices noticeably higher.
Base metal prices moved higher last week, supported by a significantly weaker U.S. dollar, falling inventories and increased expectations of “peak rates”. Prices early in the week moved lower after a series of weaker-than-expected Chinese economic data releases but then moved higher on growing convictions central banks were done raising rates.
Soybean prices ended the week higher, supported by forecasts of reduced U.S. yield, lowered (weather related) Brazil production and good export demand. Corn prices moved slightly lower on weak export demand and continued good harvest progress. Wheat prices, too, moved lower, affected by weakish export demand and good harvest progress. All grain prices moved significantly higher Friday, reacting to a sharply weaker U.S. dollar.
Coming Up This Week
Very light data week. Jobless claims, consumer sentiment and Fed Chair Power speaks.
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.
