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Commoditized Wisdom: Metals & Markets Update (Week Ending November 12, 2021)

Commoditized Wisdom: Metals & Markets Update (Week Ending November 12, 2021)

Posted:
Topic: Commodities
Publication Type: Market Commentaries
Commoditized Wisdom: Metals & Markets Update (Week Ending November 12, 2021)

Key points

  • Energy prices were all lower last week led by sharply declining natural gas prices. WTI and Brent crude oil prices fell a little over ½ percent.  Gasoline prices were down 1/3 percent and heating oil prices fell 2%.  Natural gas prices dropped over 13%.
  • Grain prices moved significantly higher last week. Grain prices rose the most, increasing about 6.5%.  Corn prices rose 4% and soybean prices increased 3.2%.
  • Precious metal prices once again ended the week higher. Gold prices rose over 3%, platinum prices gained over 4.5% and silver prices increased close to 5%.
  • Base metal prices also moved higher. Aluminum prices increased almost 6%, copper and nickel prices rose close to 3% and zinc prices gained 1%.
  • The Bloomberg Commodity Index edged higher, increasing under 0.1% last week. Negative energy sector performance was offset by positive performance in the grains, base and precious metals and softs sectors.
  • $270 million commodity ETP outflows last week. Broad commodity ($99m), silver ($89m) and energy (ex-crude oil) ($67m) ETP inflows were the primary inflows last week. Only small, minimal ETP outflows last week.

Commentary

Monday saw all three major stock indexes close at record highs supported by Congress’ passage of the $1+ trillion infrastructure package and continuing the previous week’s strong performance.  An as-expected-but-high PPI release Tuesday pushed markets lower with renewed concerns the Fed may find it necessary to tighten monetary policy more aggressively. These concerns were increased with Wednesday’s much higher-than-expected CPI release, pushing stock prices lower and lifting 10-year U.S. Treasury rates 13bps higher.     Stock markets moved higher the remainder of the week, supported by strong earnings releases and as investors, assisted by a sharply lower consumer sentiment reading, seemingly reduced their concerns of a more aggressive Fed. At week’s end, the S&P 500 Index decreased 0.3% to 4,682.85, the Nasdaq Composite Index fell 0.7% to 15,861.00, the Dow Jones Industrial Average dropped 0.6% to 36,100.37, the 10-year U.S. Treasury rate increased 12bps to 1.57% and the U.S. dollar (as measured by the ICE U.S. Dollar index - DXY) strengthened 0.8%.

A volatile week for oil prices, rising early in the week, falling sharply Wednesday and then see-sawing into the end of the week.  Prices moved over 3% higher through Tuesday supported by Congressional package of the $1+ trillion infrastructure package and the lifting of U.S. travel restrictions.  Wednesday’s much larger-than-expected increase in U.S. oil inventories and a strengthening U.S. dollar (on the back of Wednesday’s 30-year high CPI release) drove prices 3% lower.  Prices then moved about ½ percent higher Thursday only to see those gains reversed and more Friday with delayed increased concerns of more aggressive Fed tightening following Wednesday’s CPI release.  WTI crude oil prices ended the week about ½ percent lower.  Natural gas prices also had a volatile week, falling 8% and 7% Tuesday and Friday, respectively, and rising 5.5% Thursday.  Rising supplies due to mild fall weather and increasing shale oil production pushed natural gas prices over 13% lower for the week.

Gold prices moved higher again last week supported by growing inflation concerns in the face of cautious and moderate U.S. Federal Reserve tightening.   Tuesday’s as-expected-but-high PPI release and Wednesday’s much higher-than-expected CPI release sharpened inflation concerns with gold prices increasing despite a stronger U.S. dollar and rising 10-year U.S. Treasury rates.   10-year U.S. real rates fell 7bps last week (buoying gold prices) meaning the rise in in 10-year U.S. Treasury rates was entirely the result of rising inflation expectations. Silver prices also moved higher last week, outperforming gold prices, benefiting from rising base metal prices as well.

Base metal prices moved higher last week supported by stronger-than-expected Chinese export numbers, tight supply conditions and continued easy-money central bank policies.  A strengthening U.S. dollar and continued concerns regarding possible Evergrande default worked to cap price gains.  

Grain prices moved sharply higher last week supported by a more-bullish-than-expected WASDE report and strong export demand.  Rising Russian wheat export taxes and significantly lower exports worked to support wheat prices in the face of strong demand in particular from Egypt.

Coming up this week    

  • Relatively light data-week highlighted by Retail Sales, Housing Starts and Permits and the Philadelphia Fed Mfg Index.
  • Reatil Sales, Import and Export Prices, Industrial Production and Housing Market Index on Tuesday.
  • Housing Starts and Permits on Wednesday.
  • Philadelphia Fed Mfg Index and Jobless Claims on Thursday.
  • EIA Petroleum Status 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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