Hecht Commodity Report

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  • Silver breaks out to the upside as gold probs above $1900 per ounce
  • Double-digit percentage gains in platinum and palladium
  • Energy commodities move mostly higher
  • Coffee rallies from below $1 per pound
  • The dollar index breaks below a technical support level

 

Hi-ho silver! The story of the week was the silver market. On July 21, the price broke out above the July 2016 high at $21.095 and rose to $23.67 per ounce on July 23. The peak was the highest price since 2013. Silver closed the week at $22.85 on the active month September COMEX futures contract.

Source: CQG

The quarterly chart shows a significant breakout to the upside in the silver market this past week.

Meanwhile, gold was probing above the $1900 level for the first time since 2011 on Friday. The August futures contract reached a high at $1904.60, only $16.10 below its record high. As gold and silver have headed higher, the dollar index has gone the other way.

Source: CQG

The weekly chart shows that that dollar index fell to a low of 94.300 on Friday, July 24, and settled just above that level at 94.380. The index fell below technical support at 94.61. The next level to watch on the downside is at the September 2018 low at 93.395.

The stimulus continues to weigh on the value of the dollar and all fiat currencies. The ascent of gold and silver could be a sign that commodity prices will continue to head higher. The period from 2008 through 2012 that followed the global financial crisis could be a model for the price action over the coming months and years.  I remain bullish on the commodities asset class as the stimulus is fuel for higher prices.

 

Highlights in commodities:

  • August gold rose by 4.83% on the week, settling at $1897.50 per ounce
  • September silver rose 15.61% for the week as the precious metal settled at $22.85 per ounce on July 17 after trading up to $23.67, the highest level since 2013
  • October platinum rallied 12.52% on the week. October platinum was at a $941.50 per ounce discount to August gold futures, which narrowed since last week
  • September palladium rose 10.74% and settled at $2294.10 per ounce. Rhodium was at a midpoint of $7,800 per ounce up $500 from July 17
  • September copper was 0.41% lower to the $2.8925 level since last week
  • August iron ore futures moved 0.74% lower over the past week
  • The BDI fell 18.30% since July 17 to the 1,388 level
  • October Rotterdam coal moved 1.04% higher since last week
  • September lumber was 1.71% lower since July 17 and was at the $541.40 per 1,000 board feet level
  • August NYMEX crude oil rolled to September and rose by 1.33%. The September contract closed the week at $41.29 per barrel- EIA and API crude oil inventories rose for the week ending on July 17
  • September Brent crude oil moved 0.46% higher since last week to $43.34 per barrel
  • The premium for Brent over WTI in September closed Friday at the $2.05 level as the spread was down $0.34 per barrel since last week
  • September gasoline rose 4.13% while September heating oil futures posted a 2.85% gain over the past week
  • The gasoline crack spread in September was 16.65% higher since last week. September heating oil crack moved 6.44% to the upside since July 17 as gasoline and heating oil outperformed crude oil
  • Natural gas recovered by 5.24% on the August futures contract closing the week at $1.808 per MMBtu. The EIA reported an injection of 37 bcf into storage on Thursday for the week ending on July 17- Injections have been falling for the past four weeks
  • September ethanol fell 2.20% on the week on weakness in corn
  • November soybeans moved 0.47% higher but remained just below the $9 per bushel level
  • December corn was 1.40% lower on the week
  • CBOT September wheat rose 0.89% since last week to $5.3950 per bushel
  • October sugar fell 2.05% since July 17 and closed at 11.49 cents per pound on Friday
  • September coffee posted a 5.96% gain since last week as the price was at the $1.0840 per pound level
  • September cocoa was 2.96% higher since July 17
  • December cotton fell 2.97% since last week as the fiber futures were at the 60.10 cents per pound level
  • September FCOJ futures declined 2.20% since the previous report to $1.2450 per pound
  • August live cattle fell 1.89% since last week to settle at $1.01325 per pound
  • August feeder cattle declined 0.46% since July 17
  • August lean hog futures moved 2.27% higher over the past week and settled at 54.00 cents per pound
  • The September dollar index futures contract fell 1.57% on the week to below the 94.40 level, which was a technical breakdown
  • September Long-Bond futures were trading at 181-06 up 1-12 for the week
  • The Dow Jones Industrial Average closes at 26,470 on Friday, July 24 down 202 points from July 17. The S&P 500 fell only 0.28% since last week. The tech-heavy NASDAQ corrected to 10,363.18, down 140.01 since last week. The VIX was trading at around 25.84 on Friday up 0.16 on the back of lower stocks
  • Bitcoin was trading at $9,575.16 on Friday up $433.68 or 4.74% since July 17
  • Ethereum was trading at $281.80 on Friday, up 21.13% since the last report

 

Price Changes for the week:

 

DBC closes at $12.90 per share, up 24 cents since July 17

 Source: Barchart

DBC is the Invesco DB Commodity Tracking product which represents a diversified basket of commodities futures contracts, has net assets of $851.27 million, and trades an average daily volume of 988,514 shares. The fund summary for DBC states that it holds a diversified group of commodities futures but is weighted towards energy. The average volume fell, net assets were stable over the past week, and the price of the ETF moved higher from July 17.

 

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

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