• Trade dominates the market action- The US dollar index rallies
  • Precious metals correct lower across the board
  • Copper and crude oil rise
  • Natural gas moves higher on cold weather and a lower-than-expected inventory injection
  • Not much price action after the November WASDE report

 

The story of this week:

 

It’s All About Trade

 

The trade war between the US and China has been one of the most significant issues facing markets since 2018. This week, on Thursday, optimism reached a new high as the Chinese said that a deal was on the horizon that would roll back some of the tariffs. The news sent stocks to another new record high.

Source: CQG

The chart of the E-Mini S&P 500 futures contract shows that it rose to a new record level at 3,097 on November 7. However, it pulled back a bit on Friday because President Trump injected some doubt into if he is prepared to make any significant changes in the current protectionist measures.

Source: CQG

US 30-Year bonds dropped as the market believes a de-escalation of the trade war would cause the Fed to pause and not lower interest rates at its December meeting.

Source: CQG

Copper futures rose to the highest price since late July at $2.73 per pound on November 7, as the red metal is a barometer for the Chinese economy. However, the price dropped back below the $2.70 level as President Trump managed expectations for a “phase one” trade deal.

Source: CQG

The prospects for a trade agreement that would remove some uncertainty from markets pushed the price of gold below the $1500 per ounce level. The yellow metal traded to its lowest price since early August at $1457 per ounce and settled the week at just under $1463.

Source: CQG

The price of crude oil moved higher to settle the week at above the $57 per barrel level as a trade deal would lower the risk of a global recession.

Trade will continue to be a significant factor when it comes to the path of least resistance for commodities and markets across all asset classes. If we have learned one thing over the past week, it is that optimism and pessimism have changed places, causing lots of price action, which is likely to continue.

 

Highlights in commodities:

  • December gold corrects 3.21% lower and settled near the low at $1462.90 per ounce
  • December silver falls 6.81% on the week as the volatile precious metal settled below $16.90 per ounce
  • Platinum posts a 6.38% loss on the week. January platinum was at a $569.80 per ounce discount to December gold futures, which widened since last week
  • Palladium moved 4.27% lower for the week as it settled at just over $1700 per ounce
  • December copper edged 0.92% higher on optimism over trade
  • December iron ore futures moved 4.43% lower on the week
  • The BDI plunged 17.50% since November 1 to the 1428 level
  • January Rotterdam coal moves 2.10% lower since last week
  • January lumber falls 4.46% since November 1 to $394.40
  • December NYMEX crude oil moved 1.85% higher since November 1
  • January Brent crude oil moved 1.25% higher since the previous report as Brent underperformed NYMEX crude oil
  • The premium for Brent over WTI in January closes Friday at the $5.20 level down 22 cents since last week
  • December gasoline moved 1.33% lower while December heating oil futures fell 0.78% over the past week
  • The gasoline crack spread in December was 16.67% lower while the December heating oil crack moved 6.78% to the downside since November 1 as products underperformed crude oil
  • Natural gas rose 2.76% on December futures closing the week at $2.789 per MMBtu. The EIA reported an injection of 34 bcf into storage on Thursday for the week ending on November 1 as the withdrawal season approaches
  • December ethanol moves 2.82% lower on the week on weakness in gasoline and corn futures
  • January soybeans fell 0.61% since last week in post-WASDE trading
  • December corn fell 3.08% on the week
  • CBOT December wheat declined 1.11% since last week. December KCBT wheat trading at an 88.75 cents discount under December CBOT wheat. The discount moved towards the historical norm by 1.25 cents since last week
  • March sugar rose 0.72% since November 1
  • December coffee rose 5.24% on the week
  • December cocoa rose 1.01% since last week
  • December cotton moved 0.76% higher since November 1
  • January FCOJ futures increased by 1.21% since last week’s report
  • December live cattle fell 0.23% since last week
  • January feeder cattle were 0.09% lower since November 1
  • December lean hog futures moved 0.50% lower over the past week
  • The December dollar index futures contract rose 1.20% on the week
  • December Long-Bond futures trading at 156-07 down 4-25 for the week as prospects for further Fed rate cuts fall
  • The Dow Jones Industrial Average closes at 27,681 on Friday, November 8, up 334 points from November 1. The S&P 500 rose by 0.85% since last week. The VIX fell 0.25 and was trading at around 12.05 on Friday as stocks rise to new highs
  • Bitcoin was trading at $8,844.36 on Friday down $393.10 or 4.26% since November 1.
  • Ethereum was trading at $184.48 on Friday, down 0.30% since the last report

 

Price Changes for the week:

DBC closes at $15.61 per share, unchanged since November 1

 Source: Barchart

 

DBC is the Invesco DB Commodity Tracking product which represents a diversified basket of commodities futures contracts, has net assets of $1.37 billion and trades an average daily volume of 959,907 shares. The fund summary for DBC states that it holds a diversified group of commodities futures but is weighted towards energy. The average volume and net assets fell over the past week along while the price of the ETF was unchanged.

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.