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Commoditized Wisdom: Metals & Markets Update (Week Ending April 15, 2022)

Commoditized Wisdom: Metals & Markets Update (Week Ending April 15, 2022)

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Topic: Commodities
Commoditized Wisdom: Metals & Markets Update (Week Ending April 15, 2022)
  • Energy prices were sharply higher last week, led by natural gas prices. July WTI and Brent crude oil futures prices increased 8.5% and gasoline prices rose 8%. Gasoil and heating oil prices gained 11.5%.    Natural gas prices surged 17%.
  • Grain prices were mainly all higher. Chicago and Kansas wheat prices rose 4.3% and corn prices increased 3.1%.  Soybean prices edged 0.2% lower.
  • Precious metal prices were mainly higher as well. Spot gold, platinum and silver prices rose 1.4%, 1.6% and 3.6%, respectively. Spot palladium prices fell 2.5%.
  • Base metal prices were mixed. Aluminum and nickel prices fell 2.6% and 2.0%, respectively. Copper prices were almost unchanged at up 0.1% and zinc prices rose 3.8%.
  • The Bloomberg Commodity Index increased 4.8%. 80% of the increase came from the energy sector with the remainder coming from the grains and precious metals sectors.   The base metal and softs sectors moved slightly lower on the week.
  • Good flows into commodity ETPs last week led by gold ($789m), and broad commodity ($586m) inflows. Agriculture ($206m) and silver ($138m) ETPs had strong inflows as well.   Crude oil (-$145m) ETPs experienced the only significant outflows.

Commentary

Yet another volatile week for U.S. stock markets with the S&P 500 and Nasdaq Composite Index moving between 1% and 2% 3 out of the 4 trading days last week.   All three major stock indexes moved lower last week the Dow Jones Industrial Average significantly outperforming both the Nasdaq Composite and S&P 500 Index as value stocks continued to outperform growth stocks.  Inflation concerns, spurred by near-record CPI and PPI releases (Tuesday and Wednesday, respectively), rising interest rates, Chinese Covid-related lockdowns and growing concerns an aggressive Fed may precipitate slower growth or a recession were all factors pushing stock markets lower last week.     10-year U.S Treasury rates rose again last week, increasing 13bps.  Most of the increase, again, came from rising real rates (+10bps to -0.08%) but 10-year inflation expectations also rose, increasing 3bps to 2.91%.   At week’s end, the S&P 500 Index decreased 2.1% to 4,392.59, the Nasdaq Composite Index fell 2.6% to 13,351.08, the Dow Jones Industrial Average decreased 0.8% to 34,450.84, the 10-year U.S. Treasury rate rose 13 bps to 2.83% and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY) strengthened 0.6%.

Crude oil prices moved sharply higher last week after falling almost 4% Monday.  Precipitated by Chinese Covid-related lockdowns and SPR releases by the U.S. and IEA member states, oil prices began the week on a weak note, falling nearly 4%.  Renewed European efforts to ban Russian oil and gas imports along with voluntary boycotting of Russian oil and gas, OPEC+ refusal to increase production, and reports of China easing lockdowns pushed prices nearly 13% higher the remainder of the week.   For the week, WTI and Brent crude oil prices rose 8.5%.   Natural gas prices rose sharply again last week, increasing nearly 17%, benefiting from strong European demand, forecasts for colder-than-normal weather and lower-than-usual storage levels.  

Gold prices moved higher again last week despite rising rates and a stronger U.S. dollar.  Increased safe-haven investment demand due to renewed uncertainty regarding the Ukraine-Russia war and growing concerns about continued, elevated levels of inflation helped move gold prices higher on the week. Thursday’s ECB decision to leave monetary policy unchanged pushed the U.S. dollar higher, weakening gold prices Friday.   And while 10-year U.S. Treasury rates increased 13bps last week, 10-year breakeven inflation rates continue to rise as well.  Silver and Platinum prices rose with gold prices while palladium prices were almost 3% lower, perhaps on profit taking.

Base metal prices fell sharply Monday due to demand concerns surrounding China’s Covid-related lockdowns.  Prices moved higher the remainder of the week with reports of the easing of Chinese restrictions and continued supply concerns.   Reports of Chinese central bank stimulus also helped to support prices, though nickel and aluminum prices ended lower on the week.  Zinc prices continued to rally, continuing to benefit from restricted production due to high energy prices. 

Wheat and corn prices moved higher last week, supported by weather concerns both in the U.S. and South America, strong demand and Ukraine-Russia supply concerns.   Soybean prices, down almost 2% Monday on Chinese Covid-related demand concerns, finished the week down only 0.2%.

Coming up this week    

  • Housing data, manufacturing and services purchasing managers index releases and Fed Chairman Powell speaking Thursday fill out this coming week.
  • Housing Starts and Building Permits on Tuesday.
  • Existing Home Sales on Wednesday.
  • Jobless Claims, Phil. Fed Mfg Index and Fed Chairman Powell Speaks on Thursday.
  • Mfg and Services PMI and Markit Composite PMI on Friday.
  • EIA Petroleum Status Report Wednesday and Baker-Hughes Rig Count on Friday.
  • CPI on Tuesday.
  • PPI on Wednesday.
  • Jobless Claims, Retail Sales and Consumer Sentiment on Thursday.
  • NY Empire State Mfg Index and Industrial Production 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.

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