Commodity Exchange Weekly: 04/12/2023 - 08/12/2023.




By Chinedu Okoye 





Gold:

The past week has seen gold prices drop from record highs around $2,135, to a 3.29% drop to $2004.49 as at Friday December 8th close.

Treasuries also experienced wild swings, with the 10 year yield dropping to as low as 4.1% before rising to close at 4.229% on Friday. This is from a high of near 5% seen last month.

The yellow metal has gained momentum in recent weeks as fundamentals begin to fall in place. The less than hawkish fed rhetoric on rates and the mild consumer and price data in the past month, gas the market pricing in a pause and possible cut in 2024, as the effects of high interest rates begin to set into the economy.

Holding above $2000 for two weeks in a row, gold’s safe haven status seems restored.


Commodity Closing  Price  % ∆
Oil (BRENT) 75.65
Oil (WTI) 71.26 -4.58
Silver 23.29 -10.07
Copper  3.834 -2.17
Nat Gas 2.552 -6.31
U.S. Wheat  632.25 5.11
U S.  Corn 486.75 0.7
U.S. Soybean 1306.25 -1.71
Cocoa (London) 3574 2.09
Cocoa (U.S.) 4290 2.53
Aluminum  2139 -3.43
Zinc 2389 -5.12
Lead 2024 -4.98
Gold 2004.49 -3.29

(Source: investing.com)



Energy:

Energy commodities in focus traded sideways or generally downwards in the week. Both WTI and Brent benchmarks saw weekly declines, WTI ended the week at $71.26 even as it reached lows of $69 on December 6th. Brent closed in Friday at $75.65.

The prices above brings the BRENT-WTI Spread, a measure I use to gauge directional price movements, to $4.39. The $4 dollar level has stayed for sometime, suggesting the demand for both OPEC and Non-OPEC Oil have been on an almost equal decline.

Natural Gas fell 6.31% in the week to $2.552 amplifying the bear market fears for energy commodities.


Agriculture:

Apart from Soybean (using U.S. Soybean as a proxy), all other agricultural commodities reviewed saw a rise on the week, and this trend has been consistent for year-on-year as well.
Fragmentations in supply chains and artificial disruptions from COVID and the Russia-Ukraine conflict has seen commodity prices soar. 

This is a trend that could endure for longer as good insecurity in parts of the world increases. Traders and agric investors use commodity futures to hedge against unforeseen risks and to gain exposure to expected gains from price increases.


Other Metals:

The bear trend in solid minerals continued on the week with Aluminum, Zinc and Lead declining 3.43%, 5.12%, and -4.98% respectively on the week.

A slowdown in economic activity could partially explain this decline as real estate in China and the US and around the world are expected to slow, new home sales figures are on the decline as interest rates feeds through to the economy via high mortgage rates (in the US), and Developers (in China) suffer liquidity issues.


 (Chart by Zero Analytics)


Concluding Note:

At Zero Analytics, we are bearish in Solid Minerals (Other Metals), neutral on Previous Metals, bullish on the long-term Energy (Crude Oil and Natural Gas) prices and Agriculture as well. 

Possibilities of a slow down in the US, Europe and Asia (Japan and China), may raise the opportunity costs of holding Gold and Silver with relation to Treasuries in theory term, however a possible vut or the anticipation of it could create safe haven demand that could see both metals rise. 

A slowdown in the worlds developed economies spells trouble for other metals and possibly energy, but the latter can be tweaked by OPEC plus supply cap.

Agriculture is expected to continue to be fueled by food inlfatio in highly populated and lesser developed countries. This can be amplified by supply capabilities in resource rich Lesser Developed Countries in Africa. 

DISCLAIMER:
This does not serve as investment advice, it is merely a discussion on future expectations on future market trends. I am long Gold, Palm Oil, and Treasuries.



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