- Gold and silver continue to post gains
- Oil remains over the $40 per barrel level, but natural gas rebounds
- Copper declines on Friday and moves below $2.80 per pound
- Weakness in grains as the harvest approaches
- The stock market remains strong with the NASDAQ over the 11,000 level
Volatility in markets creates a paradise for nimble traders with their fingers on the pulse of markets, but it can be a nightmare for investors. The current environment promises that price variance will continue to be at a high level for the foreseeable future. The US dollar has been falling since March, which supports commodity prices. The US election in November will determine the policy path of the world’s wealthiest nation. Uncertainty over the contest’s outcome will reach a peak over the coming months as the polls are likely to tighten. The global pandemic is far from over and will remain a source of uncertainty until a vaccine returns the global economy to some sense of normalcy. However, we should expect a new normal as the coronavirus has changed human behavior.
Keep stops tight, take profits when they are on the table. Approach markets with a solid plan for risk and reward. While supply and demand fundamentals are essential factors for the path of least resistance for prices, the trends created by the herd behavior of buyers and sellers will continue to create opportunities.
Friday’s employment data topped estimates as payrolls rose by 1.76 million jobs. However, the unemployment rate of 10.2% remains well above pre-pandemic levels. December old closed the week above the $2000 level after trading to almost $2090. September silver traded to a high of $29.915 before settling around the $28 level. Crude oil made a new marginal high for the week before pulling back, and natural gas rose to the $2.20 level on September futures. Grain prices pulled back as the harvest season is on the horizon.
I remain bullish on all commodity prices because of the falling dollar and rising deficits. The tidal wave of liquidity will continue to ignite inflationary pressures. However, markets rarely move in a straight line. I will be trading from the long side of the market in most commodities but will be buying on dips and using rallies to take profits while maintaining long core positions.
If you expect volatility to continue, you will not be disappointed.
Highlights in commodities:
- December gold rose by 2.12% on the week, settling at $2028 per ounce after making a new record high at $2089.20. Gold put in a bearish reversal on Friday
- September silver rose 13.73% for the week as the precious metal settled at $27.54 per ounce on August 7 after trading up to $29.915, the highest level since early 2013
- October platinum rose 5.60% on the week. After probing above $1000, it closed just over the $970 level. October platinum was at a $1057.60 per ounce discount to December gold futures, which slightly narrowed since last week
- September palladium rose 1.46% and settled at $2176.60 per ounce. Rhodium was at a midpoint of $8,500 per ounce up $550 from July 31
- September copper fell 2.63% to the $2.7925 level since last week
- September iron ore futures moved 5.46% higher over the past week
- The BDI rose 11.28% since July 31 to the 1,500 level
- October Rotterdam coal moved 2.12% lower since last week
- September lumber was 11.33% higher since July 31 and was at the $652.20 per 1,000 board feet level as it traded to a new all-time high at $659.40 on Friday
- September NYMEX crude oil rose by 2.36%. The September contract closed the week at $41.22 per barrel- EIA and API crude oil inventories fell for the week ending on July 31 for the second straight week
- October Brent crude oil moved 1.95% higher since last week to $44.36 per barrel
- The premium for Brent over WTI in October closed Friday at around the $2.87 level as the spread was down $0.07 per barrel since last week
- September gasoline rose 3.12% while September heating oil futures posted a 0.33% loss over the past week
- The gasoline crack spread in September was 4.08% higher since last week. September heating oil crack moved 11.92% to the downside since July 31
- September natural gas rallied 24.40% and closed the week at $2.238 per MMBtu. The EIA reported an injection of 33 bcf into storage on Thursday for the week ending on July 31- Natural gas closed not far from its high for the week
- November soybeans moved 2.80% lower and further away from the $9 per bushel level
- December corn was 1.91% lower on the week
- CBOT September wheat declined 6.73% since last week to below $5.00 per bushel
- October sugar rose only 0.24% since July 31 and closed at 12.67 cents per pound on Friday
- September coffee posted a 2.94% loss since last week as the price was at the $1.1545 per pound level
- September cocoa was 6.08% higher since July 31
- December cotton fell 0.48% since last week as the fiber futures were at the 62.36 cents per pound level after rising to a new short-term high at 65.05 on August 6. The price corrected lower on Friday
- September FCOJ futures declined 6.08% since the previous report to $1.1435 per pound
- October live cattle declined 1.32% since last week to settle at $1.06450 per pound
- October feeder cattle fell by only 0.17% since July 31
- October lean hog futures moved 2.72% higher over the past week and settled at 50.975 cents per pound
- The September dollar index futures contract rose only 0.10% on the week and closed just above the 93.40 level
- September Long-Bond futures were trading at 181-18 down 0-28 for the week
- The Dow Jones Industrial Average closed at 27,433 on Friday, August 7 up 1,005 points from July 31. The S&P 500 rose by 2.45% since last week. The tech-heavy NASDAQ moved higher to 11,010.98 up 265.71 since last week. The VIX was trading at around 22.21 on Friday down 2.25 on the back of the rising stock market
- Bitcoin was trading at $11,579.62 on Friday up $218.63 or 1.92% since July 31- Bitcoin futures traded to a high of over $12,000 during the week
- Ethereum was trading at $377.78 on Friday, up 9.08% since the last report after recent gains
Price Changes for the week:
DBC closes at $13.17 per share, up 23 cents since July 31
DBC is the Invesco DB Commodity Tracking product which represents a diversified basket of commodities futures contracts, has net assets of $851.27 million, and trades an average daily volume of 999,192 shares. The fund summary for DBC states that it holds a diversified group of commodities futures but is weighted towards energy. The average volume fell slightly, net assets were stable over the past week, and the price of the ETF moved higher from July 31.
Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal. This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.