Hotline Blog

Follow us on

  • New highs in gold and silver and then a reversal
  • Platinum moved higher and copper reversed to the upside
  • Oil and oil products post gains as natural gas approached critical technical resistance at $2.53 per MMBtu
  • Weakness in grain prices as the USDA will release its next WASDE report on September 12
  • Stocks rally, the dollar moves lower, and Bitcoin makes a comeback

The story of this week:

 

Copper and Gold- A pair of weekly reversals

 

The holiday-shortened week in US markets was busy as the news cycle provided two developments that caused stocks to rally and some of the leading commodities market to reverse.

News from Beijing that the Chinese are prepared to conduct more negotiations on a trade deal injected optimism into markets. On the other side of the Atlantic, the UK Parliament dealt Prime Minster Boris Johnson a significant defeat in his quest to take the UK out of the EU by the October 31 deadline. The Parliament voted to ban the Prime Minister from exiting the EU without an agreement. In a strategic move, the legislative body also moved to turn down the Prime Minister’s request for a snap election on October 15. Prime Minister Johnson’s majority disappeared, and the moves put roadblocks in place that will prevent him from keeping his Brexit promise. Less pessimism over trade between China and the US and the potential for another extension for Brexit caused a recovery in the stock market. At the same time, it caused reversals in the gold and the copper futures markets.

After hitting a new high at $1559.80 on the continuous futures contract and $1566.20 on the December contract on September 4, the gold market put in a bearish reversal on the weekly chart.

Source: CQG

Gold rose to a higher level than the prior week and closed on September 6 below the previous week’s low. The technical move could signal at least a short-term top in the gold market which had been rallying since late April. The gold market had moved to the highest level since 2013 on the back of fear and uncertainty.

Source: CQG

Meanwhile, copper went the other way. The price of the red metal dropped to its lowest level at $2.4675 on the continuous futures contract on September 3 and then proceeded to rally to close the week at over the $2.60 per pound level. The bullish reversal in the copper market was a sign of optimism over the global economy and could lead to more gains. Copper prices have been falling steadily since April.

Meanwhile, the natural gas futures market traded to a high at $2.505 per MMBtu on Friday, after falling to a low at $2.029 per MMBtu in early August. The energy commodity was trading at just below the level of critical technical resistance at the $2.53 level, which was the low from 2018. In 2017, natural gas futures found a bottom at $2.522. The levels of support that gave way to the move to just above $2 per MMBtu are now resistance areas on the weekly chart. A move above the $2.53 level could attract new buying in the futures market over the coming sessions. The bulls have the winds of seasonality in their sails as the approach of the peak season for demand begins in mid-November each year.

There was lots of action in markets across all asset classes during the first week of September. Volatility is likely to carry over to the rest of the month.

 

Highlights in commodities:

 

  • Gold moves 0.91% lower and puts in a bearish reversal on the week
  • December silver moves to a high at $19.75 and reverses to close 1.22% lower at $18.119 per ounce
  • Platinum posts a 2.88% gain on the week. October platinum was at a $550.50 per ounce discount to October gold futures, which narrowed since last week
  • Palladium moved 0.36% higher for the week and settles at just under the $1545 per ounce level
  • September copper gains 3.23% and puts in a bullish reversal on the weekly chart after falling to a new low on September 3
  • October iron ore futures move 4.57% higher on the week
  • The BDI moved 9.75% higher since August 30 and rises to the 2499 level
  • October Rotterdam coal moves 4.81% higher since last week
  • November lumber falls 4.53% since last week
  • October NYMEX crude oil 2.58% higher since August 30 as inventories and the rig count decline and economic data from China improves
  • November Brent crude oil moved 4.20% higher since the previous report as the Brent outperformed WTI crude oil
  • The premium for Brent over WTI in November closes Friday at the $5.08 level up $0.94 from last week
  • October gasoline moves 2.91% higher while October heating oil futures rise 3.43% over the past week
  • The gasoline crack spread in October was 8.03% higher while the October heating oil crack moved 6.42% to the upside since August 30
  • Natural gas rose 9.23% on October futures closing the week at $2.496 per MMBtu. The EIA reported an injection of 84 bcf into storage on Wednesday for the week ending on August 30
  • October ethanol moves 4.40% lower on the week on selling in the corn futures market
  • November soybeans fell 1.29% since last week
  • December corn declined 3.85% on the week
  • CBOT December wheat edged 0.27% higher since last week. December KCBT wheat trading at a 70.50 cents discount under December CBOT wheat. The discount moved away from the historical norm by 5.25 cents since last week
  • October sugar dropped 1.08% since August 30 as it probed below the 11 cents per pound level
  • December coffee rose 0.21% on the week
  • December cocoa recovered by 2.48% since last week
  • December cotton fell 0.42% since August 30 and remains near the 2016 low
  • November FCOJ futures fell 1.69% since last week’s report
  • October live cattle collapsed by 4.09% since last week as the peak season ended last weekend
  • October feeder cattle rose just 0.08% since August 30
  • October lean hog futures steady with only a 0.04% loss over the past week
  • The September dollar index futures contract falls 0.50% on the week after the index rises to a new high at 99.33 and reverses
  • December Long-Bond futures trading at 164-20 down 0-24 for the week.
  • The Dow Jones Industrial Average closes at 26,797 on Friday, September 6, up 394 points from August 30. The S&P 500 gains 2.78% since last week. The VIX falls 3.94 and was trading at around 15.09 on Friday
  • Bitcoin was trading at $10,387.94 on Friday up $813.95 or 8.50% since August 30
  • Ethereum was trading at $170.83 on Friday, up 1.05% since the last report

 

Price Changes for the week:

DBC closes at $15.12 per share, up 29 cents per share since August 30  

 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 992,707 shares. The fund summary for DBC states that it holds a diversified group of commodities futures but is weighted towards energy. Both average volume and net assets fell over the past week while the ETF posted a gain.

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.   

                                                         

 

 

 

 

 

 

 

Andy Hecht

Author

Real News. Real Profits.

Trade Alerts – Podcasts – Webinars – Online Courses

14 day free trial