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Commoditized Wisdom: Metals & Markets Update (November 13, 2020)

Posted:
Topic: Commodities
Publication Type: Market Commentaries
Commoditized Wisdom: Metals & Markets Update (November 13, 2020)

Key points

  • Energy prices were all higher last week with crude oil prices increasing the most. WTI and Brent crude oil prices increased between 7.5% and 8% while gasoline prices rose 4.5%. Natural gas prices increased 3%.
  • Grain prices were mixed with wheat falling and corn and soybean prices rising. Wheat prices fell between 0.5% and 1% while corn prices rose about 1.5%.  Soybean prices increased a little over 4%.
  • Base metal prices were mainly higher last week. Nickel prices increased the most, gaining about 3.5% followed by aluminum prices, up 1.5%. Copper prices rose about ¾ percent while zinc prices moved slightly lower.
  • Precious metal prices were all lower last week. Gold prices were down 2.5%, platinum prices fell 1.5% and silver prices lost 3.5%.
  • The Bloomberg Commodity increased again last week, rising 1.24%. The energy, grains and base metal sectors contributed to its increase with the precious metal and livestock sectors detracting.
  • Total assets in commodity ETPs dropped last week, falling almost $1.6 billion. Gold ETP outflows were the predominate reason for the decline followed by crude oil and silver ETP outflows.  Broad commodity ETPs saw inflows of $125 million.  

Commentary

Moving higher on positive news regarding Pfizer’s Covid-19 vaccine, the S&P 500 rose to new highs last week.  Tech stocks, hurt by investor rotation into cyclical stocks, struggled last week with the Nasdaq Composite Index falling slightly on the week.  Concerns regarding Increasing Covid-19 cases pushed equities lower on Thursday only to see those losses completely reversed on Friday.  10-year U.S. Treasury rates rose on the week but finished off their highs with very tame CPI and PPI numbers reported Thursday and Friday, respectively.  At week’s end the S&P 500 Index increased 2.2% to 3,585.15, the Nasdaq Composite Index fell 0.6% to 11,829.29, the 10-year U.S. Treasury rate rose 8bps to 90bps and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY) weakened 0.2%.

Crude oil prices moved sharply higher through Wednesday last week supported by Pfizer’s positive vaccine results, a much larger-than-expected increase in API’s crude oil inventory report and talk OPEC+ may maintain current production cutback levels beyond January next year.  Thursday’s EIA report showing an unexpected increase in oil inventories combined with the IEA’s and OPEC’s forecast for lower demand through the end of the year pushed crude prices off their highs through the remainder of the week.

Gold prices moved sharply lower Monday falling 5% following news of Pfizer’s positive vaccine results but then moved higher throughout the remainder of the week with increased concerns surrounding Covid-19 cases, a weakening U.S. dollar and increasing expectations of U.S. and global fiscal and monetary stimulus.    Silver and platinum prices mainly followed gold prices.

Base metal prices, too, benefited from Pfizer’s positive vaccine results, generally moving higher throughout the week on expectations of increased demand.   Market expectations of a Biden presidency and its expected more conciliatory stance with respect to China also may have supported base metal prices..

Corn and soybean prices moved higher last week supported by the USDA WASDE report which lowered expectations of harvest yields while increasing forecasted export demand.   Wheat prices moved slightly lower despite forecasts of reduced supply, stable exports and increased U.S. demand.

Coming up this week      

  • Busy week data-wise with housing data, retail sales and industrial production accenting the week.
  • Empire State Manufacturing Index on Monday.
  • Retail Sales, Import and Export Prices, Industrial Production, Business Inventories and the Housing Market Index on Tuesday.
  • Housing Starts and Permits on Wednesday.
  • Jobless Claims, Philadelphia Fed Mfg Index, Existing Home Sales and the Fed Balance Sheet on Thursday.
  • EIA petroleum report on Wednesday and Baker-Hughes rig count on Friday.

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.

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