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Commoditized Wisdom: Metals & Markets Update (October 23, 2020)

Posted:
Topic: Commodities
Publication Type: Market Commentaries
Commoditized Wisdom: Metals & Markets Update (October 23, 2020)

Key points

  • Energy prices were all lower last week, falling between 2% and 3%. WTI and Brent crude oil prices lost the most with both falling close to 3%.
  • Grain prices were all higher last week with corn prices increasing 4.3%, soybean and corn prices gaining almost 3%.
  • Except for aluminum prices, base metal prices all moved higher last week. Zinc prices increased the most, gaining 5%, copper prices rose 2% and nickel prices edged up about ½ percent. Aluminum prices fell 1.5%
  • Gold prices were unchanged last week while platinum and silver prices increased. Platinum prices surged 5.5% and silver prices rose 1.1%.
  • The Bloomberg Commodity Index moved slightly higher again last week, increasing 0.25%. Gains in the base metals and grain sectors were partially offset by losses in the energy  and livestock sectors.
  • Commodity ETPs saw just under $1 billion of outflows last week primarily from gold, silver and energy (ex-crude oil) ETPs.

Commentary

Falling sharply on Monday, U.S. stock markets generally moved higher the remainder of the week.  Heightened concerns regarding a  pre-election Covid stimulus package was the primary reason equities moved lower on Monday.  Good economic reports, including lower-than-expected jobless claims and stronger-than-expected existing home sales, and increased expectations Congress would agree on a stimulus package supported the market the rest of the week.  10-year U.S. Treasury rates rose to 0.84%, increasing 10bps on the back of stronger-than-expected U.S. economic data.  At week’s end the S&P 500 Index decreased 0.5% to 3,465.39, the Nasdaq Composite Index fell 1.1% to 11,548.28, the 10-year U.S. Treasury rate rose 10bps to 84bps and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY) weakened 1.0%.

Up just over 1% through Tuesday on no real news, WTI crude oil prices fell over 4% the remainder of the week with increasing coronavirus-related demand concerns, smaller-than-expected declines in U.S. oil inventories and continued uncertainty regarding a U.S. stimulus package.

Increasing 1.2% through Wednesday on increased hopes of a U.S. coronavirus stimulus package and a weakening U.S. dollar, gold prices fell 1.2 on Thursday following much stronger-than-expected existing homes sales and lower-than-expected jobless claims.  Silver and platinum prices were higher on the week, benefiting from a weaker U.S. dollar and higher base metal prices.

Supported by very strong China economic numbers, a weakening U.S. dollar and supply concerns (growing copper miner unrest in Chile) most base metal prices climbed higher last week.   Copper prices continued to make new 2-year highs.   Aluminum prices ended lower, perhaps on expectations Chinese imports would decline in November.

Wheat prices moved sharply higher again last week as a result of continuing dry weather concerns in the U.S., South America and Russia and from strong global demand.  Soybean and corn prices moved higher as well supported by continued strong demand.  Corn prices also benefited from some concerns the Brazilian corn crop would be planted later than usual.  A weaker U.S. dollar also supported grain prices.

Coming up this week      

  • Data on homes sales throughout the week and GDP and inflation numbers toward the end of the week.
  • New Homes Sales on Mondy.
  • Durable Goods Orders and Consumer Confidence on Tuesday.
  • International Trade in Goods on Wednesday.
  • Jobless Claims, Q3 GDP (first estimate), Pending Home Sales and Fed Balance Sheet on Thursday.
  • Personal Income and Outlays, Employment Cost Index, Chicago PMI and Consumer Sentiment on Friday.
  • 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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