Commodities And Precious Metals Update (Week Ending December 27, 2019)

Key points

With the exception of natural gas prices, energy prices all moved higher last week. WTI and Brent crude oil prices increased by 2.1% and 2.6%, respectively. Gasoil and heating oil prices rose 1.9% and 1.6%, respectively and gasoline prices increased by 2.2%. Natural gas prices fell by 3.0%.

Grain prices were all higher last week. Chicago wheat prices rose 2.6% while Kansas wheat prices increased by 3.8%. Corn and soybean prices rose 0.6% and 0.4%, respectively.

Base metal prices were mixed last week. Zinc and nickel prices fell 1.5% and 2.2%, respectively. Aluminum prices increased 1.4% and copper prices gained 0.8%.

Precious metal prices moved higher as well last week. Gold prices rose 2.5%, silver prices increased 4.2% and platinum prices gained 1.1%.

The Bloomberg Commodity Index rose again last week, increasing 1.22%. The precious metals sector was the biggest contributor to the index’s increase(50bps of the 1.22% increase) followed by the energy sector (37bps) and then the grains sector (26bps).

Total assets in commodity ETPs increased $292.8m last week with almost all the increase due to inflows into gold ETPs.Gold ($337.7m) ETP inflows were partially offset by silver (-$16.4m) and crude oil (-$36.4m) ETP outflows.

Commentary

Quiet holiday-shortened week with the S&P 500 Index struggling but eking out new highs, 10-year U.S. Treasury rates slightly declining and the U.S. dollar weakening. Weaker-than-expected durable goods orders and new home sales reported on Monday (the only significant economic data released last week) may have set the tone for the remainder of the week. At week’s end the S&P 500 Index increased 0.6% to 3240.02, the 10-year U.S. Treasury rate fell 4 bps to 1.88% and the U.S. dollar weakened 0.8%.

WTI oil prices moved higher throughout the week buoyed by optimism over improved U.S.-China trade relations and a weaker U.S. dollar. Friday’s greater-than-expected drawdown in U.S. oil inventories and a decline in operating U.S. oil rigs also supported WTI crude oil prices.

Copper and aluminum prices moved higher with a weaker U.S. dollar and as expectations of stronger Chinese and global growth resulting from improved trade relations between the U.S and China. Nickel prices fell despite a large increase in LME canceled warrants last week.

Gold, silver and platinum prices rose supported by a weaker U.S. dollar, declining U.S Treasury rates and investors seeking haven investments as the year ends with U.S. stock markets reaching all-time highs.

Grain prices moved higher with increased expectations the Chinese will boost purchases. Weather-related concerns affecting global wheat supply and dry weather in Brazil adversely affecting soybean supply also supported prices.

Coming up this week