• Precious metals rally into the end of the year
  • Copper sits above $2.80 per pound
  • Strength in crude oil and oil products- Weakness in natural gas
  • Agricultural commodities move mostly higher
  • Today’s highs continue to be tomorrow’s lows in stocks- Bitcoin sits near the lows- Happy New Year!

The story of this week:

 

Happy New Year- A New Decade Awaits

 

I hope everyone had a great Christmas and Hanukkah holidays! Next week, 2019 ends, and with it, another decade will pass. It seems the older we get, the faster the clock moves.

As we head into 2020, many of the issues that faced markets throughout 2019 will continue to cause volatility. Since commodities are global assets, the progress of trade negotiations between the US and China will continue to dominate industrial and agricultural markets. When it comes to industrial raw materials, China is the demand side of the equation, and its economy will dictate if prices of copper, other base metals, crude oil, and other building blocks of infrastructure move higher or lower. In the agricultural sector, the US is a leading producer, and 1.4 billion Chinese people are the largest block of consumers. While the weather and crop issues can always impact the supply side of the fundamental equation, the ups and downs of the trade war will dictate if distortions on the demand side continue into the coming months and years.

Iran and North Korea could cause market surprises leading to risk-off periods at times as their economies continue to suffer under the weight of US sanctions. The December 12 British election has calmed the prospects for the UK and Europe. Still, the continent continues to face sluggish economic growth and political issues in many of the member nations.

Perhaps the most influential factor facing markets for the coming year will be the US Presidential election. The world’s leading economy faces a divided electorate, in what could be the most contentious contest in history, President Trump will limp into his re-election campaign after being impeached by the House of Representatives on December 18. However, all signs are that the Senate will swiftly acquit him on the two articles. While impeachment is a stain on his record, he has the winds of a robust economy and the lowest level of unemployment since the 1960s behind his sails. Incumbent Presidents tend to win elections when the economy is booming.

Moreover, victories when it comes to the USMCA and a “phase one” trade deal with the Chinese are political feathers in the sitting President’s cap. The 2020 election will stand as a referendum on both the President’s performance and on tax, energy, and many other policy issues. Therefore, stocks, bonds, commodities, and markets across all asset classes could become highly volatile during the second half of 2020 as the election reaches a crescendo and uncertainty over future Us policies grip markets. The rise of support for “Democratic Socialism” and the “Green New Deal” could cause more than a little price variance in all markets and risk-off periods.

Meanwhile, we are going into the New Year with optimism high and a robust US economy. Even though the economy continues to grow, the Fed is not likely to change monetary policy until after the election.

All the best for a happy, healthy, safe, and profitable 2020!

 

Highlights in commodities:

  • February gold recovers 2.51% and settled at $1518.10 per ounce
  • March silver rises 4.17% on the week as the volatile precious metal settled at $17.943 per ounce
  • Platinum posts a 4.01% gain on the week. January platinum was at a $567.70 per ounce discount to February gold futures, which widened marginally since last week
  • March palladium moved 4.00% higher for the week and settled at $1881.20 per ounce
  • March copper moved 0.84% higher as the red metal was just below the $2.83 level at the end of last week
  • January iron ore futures moved 0.69% lower on the week
  • The BDI fell 10.73% since December 20 to the 1090 level
  • February Rotterdam coal rose 1.11% since last week
  • January lumber moved 1.02% lower since December 20 as the price was just below the $410 per 1,000 board feet level
  • February NYMEX crude oil moved 2.12% higher since December 20
  • February Brent crude oil moved 3.07% higher since the previous report as Brent outperformed NYMEX crude oil
  • The premium for Brent over WTI in February closes Friday at the $6.44 level up 75 cents since last week
  • February gasoline moved 2.20% higher while February heating oil futures rose 1.55% over the past week
  • The gasoline crack spread in February was 1.87% higher while the February heating oil crack moved 0.37% higher since December 20 as products outperformed crude oil despite inventory increases
  • Natural gas fell 3.34% on February futures closing the week at $2.231 per MMBtu. The EIA reported a withdrawal of 161 bcf from storage on Friday for the week ending on December 20
  • February ethanol moves 0.14% higher on the week
  • January soybeans rose 0.13% since last week on the back of the trade deal
  • March corn rose 0.58% on the week
  • CBOT March wheat rose 2.58% since last week. March KCBT wheat trading at a 76.50 cents discount under March CBOT wheat down 3.50 cents since December 20. The discount moved towards the historical norm since last week
  • March sugar was unchanged since December 20 as the sweet commodity remains near the recent high
  • March coffee posted a 1.38% gain on the week
  • March cocoa rose 3.31% since December 20
  • March cotton moved 1.41% higher since last week as the fiber futures grind towards the 70 cents level
  • January FCOJ futures fell 3.23% since the previous report
  • February live cattle rose 0.72% since last week
  • January feeder cattle were 0.88% higher since December 20
  • February lean hog futures edged 0.14% lower over the past week but remained over 70 cents per pound
  • The March dollar index futures contract fell 0.75% on the week
  • March Long-Bond futures trading at 156-26 up 0-19 for the week
  • The Dow Jones Industrial Average closes at 28,645 on Friday, December 27, up 190 points from December 20. The S&P 500 rose by 0.58% since last week. The VIX was trading at around 13.41 on Friday up 0.90 on the week as the stock market is in overbought territory
  • Bitcoin was trading at $7,278.58 on Friday up only $47.39 or 0.66% since December 20
  • Ethereum was trading at $127.42 on Friday, down 1.26% since the last report

 

Price Changes for the week:

DBC closes at $16.08 per share, down three cents since December 20

Source: Barchart

DBC is the Invesco DB Commodity Tracking product which represents a diversified basket of commodities futures contracts, has net assets of $1.34 billion and trades an average daily volume of 1,024,336 shares. The fund summary for DBC states that it holds a diversified group of commodities futures but is weighted towards energy. The average volume rose over the past week while the net assets remained steady, and the price of the ETF was posted a marginal loss.

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.