• Precious metals prices under pressure except for palladium which makes a new high during the week
  • Weakness in energy prices as crude oil, oil products, and natural gas prices move lower
  • Stability in grains while meats correct to the upside
  • Sugar rebounds and coffee moves back above the $1 per pound level
  • A strong dollar while Bitcoin tanks

The story of this week:

 

End of Q3- Watch Out For Window Dressing On Monday

 

It is hard to believe that the third quarter of 2019 will end on Monday. The end of a quarter is always a time where markets are subject to manipulation where dominant market players holding positions influence prices. Hedge fund managers and those who control pools of capital often receive compensation on quarterly results. Therefore, they have an interest in optimal closing prices at the end of each quarterly period. We could see some price distortions on Monday.

Meanwhile, the price action at the end of a quarter is also a window into what market participants think for the coming quarter. Warren Buffett once said, “Only when the tide goes out, do you discover who’s been swimming naked.” The comment came after the global financial crisis, but at the end of a quarter, some leading market participants tend to show their poker hands when it comes to positions. Watching the price action at the end of the marking period can be a useful exercise to factor into one’s investment calculus.

Over the past week, energy prices fell across the board as the attacks on the Saudi oil fields faded into the market’s rearview mirror. Natural gas fell through its support level as the EIA reported a larger than expected injection into inventories. Meat prices moved higher on the back of some optimism over trade with China and grains were stable. Sugar recovered and rose by over 5% on the week. The dollar index was strong, and Bitcoin and the other digital currency prices tanked with the leader of the pack posting a more than 20% loss on the week.

As we head into the fourth quarter of 2019, the many issues facing the world are likely to cause price volatility to continue. The fourth quarter in 2018 was a risk-off period in many markets, and time will tell if we get a repeat performance over the next three months. Keep those stops tight and take profits when they are on the table. Increased price variance creates a paradise of opportunities for traders.

 

Highlights in commodities:

 

  • Gold moves 0.57% lower as the market continues to consolidate near the recent low
  • December silver underperforms gold and falls by 1.10% on the week
  • Platinum posts a 1.23% loss on the week. October platinum was at a $568.10 per ounce discount to October gold futures, which widened slightly since last week- October futures have rolled to December in gold and January in platinum
  • Palladium moved 1.72% higher for the week and made another new all-time high at $1693 on the continuous contract as the price of December futures settled at $1652.90 per ounce
  • December copper fell 0.35% as the price drops to just below the $2.60 level
  • November iron ore futures move 1.43% higher on the week
  • The BDI corrected 10.45% lower since September 20 and falls to the 1963 level as the winter approaches
  • November Rotterdam coal moves 5.33% lower since last week on weakness in oil and gas prices
  • November lumber falls 3.05% since last week
  • November NYMEX crude oil fell 3.75% since September 20 as calm in the Middle East and rising US inventories cause selling
  • November Brent crude oil moved 3.86% lower since the previous report as Brent marginally underperformed NYMEX crude oil
  • The premium for Brent over WTI in November closes Friday at the $5.87 level down $0.30 from last week
  • November gasoline moved 2.46% lower while November heating oil futures fall 2.32% over the past week as products outperform crude oil futures
  • The gasoline crack spread in November was 5.12% higher while the November heating oil crack moved 0.36% to the upside since September 20 as refining margins edge higher
  • Natural gas corrected 5.87% lower on November futures closing the week at $2.404 per MMBtu after reaching a high at $2.745 on September 17. The EIA reported a larger than the expected injection of 102 bcf into storage on Thursday for the week ending on September 20
  • November ethanol moves 3.68% higher on the week on the back of the stable corn price
  • November soybeans rose just 0.03% since last week as trade between the US and China continues to be the market’s focus as it enters the 2019 harvest season
  • December corn rose 0.20% on the week
  • CBOT December wheat gained 0.62% since last week. December KCBT wheat trading at a 79.75 cents discount under December CBOT wheat. The discount moved away from the historical norm by 3.00 cents since last week
  • March sugar rose 4.47% since September 20 after October futures rolled to March
  • December coffee gained 2.54% on the week
  • December cocoa rose by 0.69% since last week
  • December cotton edged 0.63% higher since September 20 to just under 61 cents per pound
  • November FCOJ futures fell 0.30% since last week’s report
  • October live cattle gained 5.71% since last week
  • October feeder cattle rose 3.68% since September 20
  • October lean hog futures recovered by 8.16% over the past week on hopes over Chinese pork purchases from the US
  • The December dollar index futures contract rose 0.64% on the week as the dollar index rises to a new high on the December futures contract at 98.955 on September 27
  • December Long-Bond futures trading at 162-07 up 0-22 for the week
  • The Dow Jones Industrial Average closes at 26,820 on Friday, September 27, down 115 points from September 20. The S&P 500 fell 1.01% since last week. The VIX rose 1.90 and was trading at around 17.22 on Friday
  • Bitcoin was trading at $8,063.78 on Friday down $2,103.13 or 20.69% since September 20
  • Ethereum was trading at $168.49 on Friday, down 22.37% since the last report

 

Price Changes for the week:

DBC closes at $15.19 per share, down 29 cents per share since September 20 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 $1.42 billion and trades an average daily volume of 979,259 shares. The fund summary for DBC states that it holds a diversified group of commodities futures but is weighted towards energy. Average volume fell over the past week as the price of the ETF decreased.

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.