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Commoditized Wisdom: Metals & Markets Update (Week Ending June 11, 2021)

Commoditized Wisdom: Metals & Markets Update (Week Ending June 11, 2021)

Posted:
Topic: Commodities
Publication Type: Market Commentaries
Commoditized Wisdom: Metals & Markets Update (Week Ending June 11, 2021)

Key points

  • Energy prices were mainly higher last week. WTI and Brent crude oil prices increased 1.5% and 1%, respectively and gasoline and heating oil prices rose just over 2%.  Natural gas prices increased almost 6.5%.
  • Grain prices were mixed both within categories of grain and with respect to front month and longer-dated contracts. Chicago wheat prices fell 1% while Kansas wheat prices gained ¼ percent.  September Corn futures increased almost 4% while the front-month July contract only increased ¼ percent.  The November soybean contract rose ¼ percent with the front month July contract falling almost 5%.  December soybean oil contracts fell 1% much less than the front month contract which fell over 6%.
  • Base metal prices were all higher with nickel and zinc prices performing the best. Nickel and zinc prices increased just over 1% and copper and aluminum prices increased about ¼ percent.
  • Gold and platinum prices decreased last week while silver prices rose. Gold and platinum prices fell about ½ percent.  Silver prices increased close to 1%.
  • The Bloomberg Commodity Index increased 0.3%, supported by higher energy and base metal prices. The precious metals and grains sectors detracted from the Index’s performance.
  • Almost zero net inflows into commodity ETP last week resulting from small inflows into gold ($190mm) and broad commodity ($92mm) ETPs and small outflows from silver (-$220mm) and crude oil (-$110mm) ETPs.

Commentary

U.S stock markets moved lower prior to Thursday’s CPI release, reflecting the possibility the Fed may need to scale back its easy-money policies sooner than later.  Despite CPI coming in above expectations, jumping 5% YoY and 0.6% MoM, stock prices generally moved higher with the S&P 500 Index hitting a record high and the Nasdaq Composite Index increasing 0.8%.   Stock prices continued their move higher on Friday, though the Dow Jones Industrial Average ended the week lower while the S&P 500 and Nasdaq Composite Indexes moved higher.  Interestingly, 10-year U.S. Treasury rates moved lower throughout the week, falling 8bps before the CPI release.  For the week, the S&P 500 Index increased 0.4% to 4,247.44, the Nasdaq Composite Index increased 1.9% to 14,069.42, the Dow Jones Industrial Average fell 0.8%  to 34,479.6, the 10-year U.S. Treasury rate fell 10bps to 1.46% and the U.S. dollar  (as measured by the ICE U.S. Dollar index - DXY) strengthened ½ percent.

Oil prices moved higher again last week with WTI prices reaching levels not seen in over 2 years.   Indications of strong demand (the IEA indicated OPEC+ would need to boost production to meet demand in the coming months) combined with OPEC+ production restraint and news sanctions on Iran would not be relaxed or removed any time soon, helped move oil prices higher.  Wednesday’s EIA report showing a large, unexpected build in oil inventories and data released Monday showing Chinese imports had declined worked to cap gains.

Gold prices finished the week lower, hurt by a stronger U.S. dollar and risk-on investor sentiment. Thursday’s greater-than-expected CPI release initially did little to affect gold prices.  Friday, however, saw gold prices drop close to 1% as market participants adopted the “transitory inflation” view with increasing expectations the Fed will maintain its current aggressively accommodative monetary policy, diminishing safe haven demand for gold. 

Down nearly 1% through Thursday, copper prices rallied almost 1.2% Friday to finish the week slightly higher.  Pressured by Chinese commitments to prevent “unreasonable” price moves, prices rose Friday with increasing “risk-on” investor sentiment following decreasing inflation concerns and declining expectations of central bank tightening.

Continued volatility in grain prices last week with a sharp rise in contango for soybean product contracts.   For example, November soybean futures contracts increased 0.2% over the week while the July contract fell almost 5%.  Thursday’s USDA WASDE report forecasting increased U.S. soybean stock pushed soybean prices lower Thrusday and Friday.   Corn prices up over 5% through Thursday, partly as a result of a bullish WASDE report forecasting 8-year lows in U.S. corn supplies,  fell almost 1% Friday as markets reassesed supply levels.  Soybean oil futures moved sharply lower Friday on concerns President Biden may relax biofuel blending requirments.

Coming up this week    

  • A busy data-week with PPI, Retail Sales and the 2-day FOMC meeting highlighting the week.
  • FOMC Meeting begins, PPI, Industrial Production and Housing Market Index on Tuesday.
  • Housing Starts and Permits, FOMC Announcement and Jerome Powell Press Conference on Wednesday.
  • Jobless Claims and Phil. Fed Mfg Index on Thursday.
  • Consumer Sentiment on Friday.
  • EIA petroleum status report on Wednesday and Baker-Hughes rig count on Friday.
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