Commodities & Precious Metals Weekly Report: Sep 23
Posted:
Key points
Energy prices were mostly lower last week. Crude oil prices fell between 5% and 7%, gasoline prices decreased 3% and natural gas prices dropped 10%. Heating oil prices were up 1%.- Grain prices were mixed. Wheat prices were up about 2%, corn prices were unchanged and soybean prices were down 2%.
- Precious metal prices were lower. Spot gold prices fell 2%, spot silver prices lost 3.5% and spot platinum prices dropped 5%.
- Base metal prices were all lower, too. Aluminum, copper and zinc prices decreased 5%. Nickel prices fell 4%.
- The Bloomberg Commodity Index decreased 3.7%, declining mainly on falling energy and base and precious metals prices.
- Commodity ETPs saw $1 billion outflows last week almost all from gold (-$990m) and broad commodity (-$109). Small inflows were registered in silver ($59m) and crude oil ($72m) ETPs.
Commentary
Stock markets fell sharply last week with all 3 major indexes falling 4% or more. Prices fell every day last week except Monday with the FOMC’s decision to raise rates 75bps Wednesday and Fed Chairman Powell’s subsequent comments weighing heavily on market sentiment. The as-expected 75bp rate hike Wednesday was overshadowed by Chairman Powell’s statements rate rises would continue, the labor market would likely soften and the chances of a soft landing were increasingly less likely. Reflecting this sentiment, the 10-yeyar U.S. Treasury rate rose 23bps – to its highest level in over 20 years – with the entire increase due to rising real rates and the U.S. dollar (as measured by the DXY index) strengthened 3%. At week’s end, the S&P 500 Index lost 4.7% to close at 3,693.23, the Nasdaq Composite Index fell 5.1% to 10,867.93, the Dow Jones Industrial Average dropped 4.0% to 29,592.85, the 10-year U.S. Treasury rate rose 23bps to 3.68% and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY) strengthened 3%.
WTI crude oil prices ended the week sharply lower. Down 1.5% through Thursday on slowing-demand concerns, prices dropped nearly 6% Friday as the U.S. dollar sharply strengthened and on falling euro zone business activity. Supply concerns stemming from sizeable OPEC+ production shortfalls and Russia’s mobilization of reserves were pushed to the wayside on growing expectations of falling demand resulting from aggressive central bank tightening. Natural gas prices dropped more than 10% last week, pushed lower by increased production and inventory levels and falling demand due to cooler (less hot) weather.
Gold prices moved lower again last week succumbing to a strong U.S. dollar and rising 10-year real rates. Supported by increased haven demand resulting from Russia’s reserve mobilization and nuclear option rhetoric, gold prices dropped markedly Friday as the U.S. dollar sharply strengthened and on climbing real rates. Silver and platinum prices fell more than gold prices, moving with base metal prices.
Pressured lower by growing expectations of central bank-induced recessions, copper prices fell 1.5% through Thursday. Prices dropped almost 4% Friday, driven by a sharply stronger U.S. dollar and weak economic data out of the euro zone and UK. Hopes of increased Chinese demand due to relaxed Covid-related restrictions and stimulus spending were superseded by recession concerns. Aluminum, zinc and nickel prices followed copper prices.
Wheat prices, supported by Russia reserve mobilization and actions to annex parts of the Ukraine it occupies, moved 6% higher through Thursday, only to see over half those gains reversed Friday on recession-based demand concerns. Corn prices, up almost 2% through Thursday on weather-related concerns in the U.S. and South America, ended the week unchanged, falling Friday also on recession-related demand concerns. Soybean prices fared similarly, gaining support from weather and supply concerns, but falling Friday as well to end the week down about 2%.
Coming up this week
Housing data, durable goods orders, GDP and consumer sentiment fill the slots and are prominent this week.- Durable Goods Orders, Case-Shiller Home Price Index, Consumer Confidence and New Home Sales on Tuesday.
- Intl Trade in Goods and Pending Home Sales on Wednesday.
- GDP and Jobless Claims on Thursday.
- Personal Income and Outlays, Chicago PMI and Consumer Sentiment 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.
