• The US designates China as a currency manipulator
  • Precious metals post across the board gains
  • Energy prices move to the downside across the board
  • Grains rally in anticipation of the August 12 WASDE report from the USDA
  • Lots of volatility in stocks- Bitcoin posts a double-digit gain on the week as the Chinese yuan trades at the 7 level against the US dollar

The story of this week:

 

Gold At $1500 Is Making A Statement

 

Gold had another bullish week as the price of nearby futures on COMEX rose to a high at $1509.90. The price traded to the highest level since April 2013 and closed the week at around the $1497.50 per ounce. The active month December futures contract settled at $1507.80 on Friday after trading to a peak at $1522.70 on August 7.

Source: CQG

The monthly chart highlights that open interest was at over the 600,000-contract level at the end of last week. Rising open interest and price is a technical validation of the bullish price trend. While price momentum and relative strength indicators remain in overbought territory, they both continue to display upward momentum. The metrics can stay in overbought conditions for extended periods as they did from 2009 through 2011. Historical volatility at 11.30 on a quarterly basis reflects the rise of the price without any price spikes to the upside. The higher the price rises, the greater the potential for a correction in the price of the yellow metal. The critical level of technical support is at the breakout level at $1377.50, which is over $100 per ounce below the price at the end of last week.

Silver traded above the $17 per ounce level last week, reaching a high at $17.26 on August 7. While silver continues to lag gold, the price action has also been positive as silver traded to a new high for 2019.

Over the past week, the trade dispute became both a trade and a currency war between the US and China. At the same time, central banks around the world continue to slash short-term interest rates, which is supportive of the prices of precious metals. Iran continues to present challenges in the Middle East. The deadline for Brexit is on October 31. Prime Minister Boris Johnson has pledged the UK will leave the EU by the deadline with or without an agreement. The many issues facing markets over the coming weeks and months continue to support the price of gold.

We should continue to expect wide price volatility in markets across all asset classes as gold is making a statement given its price action. Over the coming week, three hotspots have the potential to move markets. Protests in Hong Kong are reaching a peak. Italy is facing political problems, and Iran continues to pose a challenge in the Middle East. At the same time, the British pound was trading at just above the $1.20 level near the low on Friday as the UK prepares for a hard Brexit on October 31. North Korea fired two new projectiles late Friday after the markets had closed. The world remains a dangerous place which adds to market volatility.

 

Highlights in commodities:

  • Gold moves 3.45% higher on the week to a new peak and trades over the $1500 per ounce level
  • September silver gains 4.06% since last week and trades over the $17 per ounce level
  • Platinum moves 1.27% higher since last week. October platinum was at a $638.20 per ounce discount to October gold futures, which widened significantly since last week
  • Palladium edged 1.08% higher for the week and settles at just below the $1420 per ounce level
  • September copper edged 0.68% higher on the week
  • September iron ore futures tank 16.06% on the escalation of the trade war
  • The BDI corrects 5.08% lower since August 2 and falls to the 1720 level
  • Rotterdam coal moves 4.22% lower on the back of weak energy prices
  • September lumber declines 4.80% since last week
  • September NYMEX crude oil moves 2.08% lower since August 2 on fears of a global economic slowdown
  • September Brent crude oil falls 5.26% since the previous report. October Brent was at $58.57 per barrel on Friday as the Brent underperformed WTI crude oil
  • The premium for Brent over WTI in October closes Friday at the $4.20 level down $1.95 from last week
  • September gasoline moves 6.03% lower while September heating oil futures fall 4.35% over the past week as products underperform the energy commodity
  • The gasoline crack spread in September was 17.75% lower while the September heating oil crack moved 9.71% to the downside since August 2
  • Natural gas fell 0.09% on September futures closing the week at $2.119 per MMBtu after falling to a lower low at $2.029 during the week. The EIA reported an injection of 55 bcf into storage on Wednesday for the week ending on August 2
  • September ethanol moves 1.10% lower on the week
  • November soybeans rose 2.68% since last week as the USDA WASDE report comes out on August 12
  • December corn gains 2.01% on the week
  • CBOT September wheat moves 1.78% higher since last week. September KCBT wheat trading at an 82.5 cents discount under CBOT wheat. The discount remains far from the historical norm with KCBT wheat trailing as the spread widened by 13.5 cents over the past week, a bearish sign for the wheat market
  • October sugar declined by 1.33% since August 2
  • September coffee edged 0.87% lower on the week
  • September cocoa declined 5.39% lower since last week
  • December cotton falls 0.88% since August as the trade dispute sends the price below 59 cents per pound the lowest level since 2016
  • September FCOJ futures moved 3.12% higher, as the price closes back above the $1 per pound
  • October live cattle moves 1.0% lower since last week
  • October feeder cattle edge 0.20% higher since August 2
  • October lean hog futures recovered by 1.90% over the past week
  • The September dollar index futures contract falls 0.54% on the week as the greenback index retreats from the new high at 98.70
  • September Long-Bond futures trading at 161-03 up 2-10 for the week as volatility returns to the markets. The long bond traded to a new high at 163-31 on August 7
  • The Dow Jones Industrial Average closes at 26,287 on Friday, August 9, down 198 points from August 2. The S&P 500 falls 0.46% since last week. The VIX gains 0.17 and was trading at around 17.97 on Friday after trading at a high at 24.81 during the volatile week
  • Bitcoin was trading at $11,866.48 on Friday up $1,393.27 or 13.3% since August 9 on the devaluation of the Chinese yuan and gains in gold
  • Ethereum was trading at $209.82 on Friday, down 3.52% since the last report

 

Price Changes for the week:

DBC closes at $14.95 per share, down 19 cents per share since August 2 on weakness in energy prices

 Source: Barchart

DBC is the Invesco DB Commodity Tracking product which represents a diversified basket of commodities futures contracts, has net assets of $1.57 billion and trades an average daily volume of 1,005,712 shares. The fund summary for DBC states that it holds a diversified group of commodities futures but is weighted towards energy. Total average volume rose over the past week in a sign of increasing interest in the commodities asset class even though the ETF edged lower and the net assets dropped.

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.