• Markets calm as stimulus stabilizes the economy
  • Precious metals recover led by silver and gold
  • Crude oil falls as the world producers struggle to cut production
  • Agricultural commodities stable after the April WASDE report
  • Stocks continue to recover, the dollar index slips, and digital currencies post gains

The story of this week:

 

Gold Continues to Grind Higher- And Silver Recovers

 

Happy holidays to all. This Easter and Passover holiday season is like no other in our lifetime. The Easter bunny is not coming out because of social distancing, and the closest thing to a big family sedar will be a conference call on Zoom or another website. Meanwhile, central banks and governments continue to pump unprecedented amounts of stimulus into the financial system to stabilize markets until scientists develop treatments and a vaccine for Coronavirus. The longer the economies around the world remained closed, the more liquidity will be necessary. Each day, the mounting trillions in quantitative easing and fiscal stimulus add to the economic rubble that will be the legacy of the global pandemic.

Governments can increase the money supply to their heart’s content during this period. However, the price tag will be a wholesale devaluation of the value of the legal tender that derives value only from the full faith and credit of the governments that price the currencies. Meanwhile, the two currencies that have been around for a lot longer than any of the other foreign exchange instruments in circulation today are gold and silver. The only way to increase the supply of the two precious metals is to extract more of them from the crust of the earth.

In an environment where nations are running the currency printing presses overtime, the bullish flames under the two precious metals are smoldering. Gold and silver prices could be preparing to take off on the upside like rocket ships.

Source: CQG

The daily chart of June COMEX gold futures highlights that the price rose to a new high of $1754.50 per ounce on April 9. Gold broke out above its critical technical resistance level of $1377.50 in June 2019. On April 9, the price was at a new high that was $377 above the level from where gold broke to the upside.

Source: CQG

Silver fell like a stone in the risk-off environment during March. In 2008, during the global financial crisis, the price of silver fell from over $21 per ounce to a low of $8.40 in seven months, a decline of 60.3%. From late February through March 28, the price of May silver futures fell from $19.005 to $11.64 per ounce or 38.8%. Silver was back over the $16 per ounce level April 9.

In 2008 risk-off also sent gold lower from $1033.90 to $681 in seven months. However, the stimulus in 2008 sent the prices of gold and silver to $1920.70 and $49.82 per ounce, respectively, in 2011.

I expect lots of volatility in markets across all asset classes over the coming days, weeks, months, and even years because of the legacy of the global pandemic. However, I expect gold and silver to continue to move to the upside as they reflect the devaluation of all fiat currencies.

Meanwhile, the three-week total on new applications for unemployment insurance was over the 17 million level and rising as of Thursday. When it comes to crude oil, Mexico remained a sticking point for a worldwide production cut of ten million barrels per day. The US offered to pick up the slack when it comes to Mexican production to settle the issue. However, the problem for the energy commodity is not the supply side; it remains demand.

Highlights in commodities: 

  • June gold rallies 6.51% lower on the week, settling at $1752.80 per ounce
  • May silver recovers 10.76% as the precious metal settled at $16.053 per ounce on April 10
  • July platinum moved 4.25% higher on the week. July platinum was at an $1,004.20 per ounce discount to June gold futures, which widened since last week
  • June palladium edged 0.19% higher and settled at $2,110.00 per ounce. Rhodium fell $500 per ounce to a midpoint of $5,500 over the past week
  • May copper was 3.06% higher to the $2.2595 level since April 3
  • May iron ore futures moved 2.94% higher over the past week
  • The BDI rose 1.76% since April 3 to the 635 level
  • May Rotterdam coal rose 0.53% since last week
  • May lumber was 22.01% higher since April 3 and was at the $322.10 per 1,000 board feet level
  • May NYMEX crude oil fell 19.69% higher and closed the week at $22.76 per barrel
  • June Brent crude oil fell 8.46% as contango between May and June made the rise in Brent lower than WTI
  • The premium for Brent over WTI in June closed Friday at the $2.66 level as the spread moved $0.83 lower since last week
  • May gasoline fell 2.07% while May heating oil futures posted a 9.15% loss over the past week
  • The gasoline crack spread in May was 507.37% higher since last week. May heating oil crack moved 5.11% higher since April 3 as the products outperformed crude oil futures
  • Natural gas rose 6.91% on May futures closing the week at $1.7330 per MMBtu. The EIA reported the first injection of the season of 38 bcf into storage on Thursday for the week ending on April 3
  • May ethanol rose 9.32% on the week
  • May soybeans moved 1.08% higher since last week
  • May corn was 0.30% higher on the week
  • CBOT May wheat was 1.32% higher since last week. May KCBT wheat trading at a 64.50 cents discount under May CBOT wheat as the discount moved 12.75 cents towards historical norm since last week
  • May sugar rose 1.16% since April 3 and closed at 10.43 cents per pound
  • May coffee posted a 3.22% gain since last week
  • May cocoa rose 1.81% since April 3
  • May cotton rose 6.65% since last week as the fiber futures were at the 54.37 cents per pound level after probing below the 50 cents level over recent weeks
  • May FCOJ futures fell 2.44% since the previous report to $1.0975 per pound
  • June live cattle moved 4.36% since last week
  • May feeder cattle recovered by 10.04% since April 3
  • June lean hog futures were only 0.72% higher over the past week after recent significant losses
  • The June dollar index futures contract fell 1.17% on the week to 99.504 as volatile trading conditions continued.
  • June Long-Bond futures were trading at 178-27 down 3-14 for the week
  • The Dow Jones Industrial Average closes at 23,719 on Thursday, April 9, up 2,666 points from April 3. The S&P 500 rose 12.10% since last week. The VIX was trading at around 41.67 on Friday down 5.13 on the week as volatility calms
  • Bitcoin was trading at $7,240.51 on Friday up $472 or 6.97% since April 3
  • Ethereum was trading at $169.32 on Friday, up 18.61% since the last report

 

Price Changes for the week:

DBC closes at $11.56 per share, up 14 cents since April 3

 Source: Barchart

DBC is the Invesco DB Commodity Tracking product which represents a diversified basket of commodities futures contracts, has net assets of $779.2 million and trades an average daily volume of 1,799,850 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 over the past week and net assets fell as the price of the ETF posted a small gain.

Please stay safe and healthy during these unprecedented times. Happy holidays!

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.