Commodities Weekly: Gold retreats from 14-month high

Precious metals

GOLD spiked higher on Friday to touch the highest since April last year, completing its fourth weekly gain in a row. The precious metal was given a lift by rising tensions in the Persian Gulf, but has since eased lower with the US dollar advancing as expectations for a Fed rate cut at this week’s meeting were scaled back to about 18% from near 30% late last week.

Speculative investors are still believing in higher prices, with net longs boosted to the highest since March last year in the week to June 11, according to the latest data from CFTC.

SILVER snapped a three-week rising streak last week as the metal failed to overcome technical resistance at the 55-week moving average of 15.105. The moving average has capped prices on a closing basis since mid-February. The 100-day moving average is another resistance point lurking above at 15.158 and this moving average has capped prices on a closing basis since March 27.

Speculative investors were net buyers of silver for a second week in the week to June 11, the latest data from CFTC shows, and net positioning turned bullish for the first time since April 30.

Silver Daily Chart

Source: OANDA fxTrade

PLATINUM appears set to fall for a third consecutive day today and looks poised to test the four-month lows just above 789.0 struck last month. Speculative investors were net sellers for a sixth straight week to June 11, and net long positions are now at the lowest since the week of February 19.

There could be some supply-side issues ahead as South Africa’s biggest union for platinum mine workers kicked off wage negotiations with demands for increases of up to 48%. South Africa is the world’s top supplier of platinum and it could face tough times ahead. However, it is worth noting that the previous agreement settled with 12.5% increases following a starting salvo of 47%.

PALLADIUM was back in favour with the markets last week, recording the biggest weekly gain in more than two decades. The precious metal is now hovering near 2-1/2 month highs as it climbs from the May lows, which retraced more than 38.2% of the rally from August 2018 to March 2019.

Speculative investors remain bullish on the commodity, increasing net long positions for a fourth straight week and boosting them to the highest since the week of April 2, the latest data from CFTC as at June 11 shows.

Base metals

COPPER has been confined to a 2.60-2.70 range so far this month, seemingly stuck near five-month lows as the US-China trade war stalemate heightens growth concerns and pressures the copper demand outlook. Copper stocks in warehouses tracked by the London Metal Exchange are currently at the highest levels since August following a huge increase in stocks on Thursday and Friday last week.

Speculative investors increased net short positions for a seventh week and are now at their most bearish in three years, according to the latest data snapshot as at June 11 from CFTC.

Energy

CRUDE OIL prices spiked higher last week following the attacks on two oil tankers in the Persian Gulf last week. Both the US and Saudi Arabia has blamed Iran for the attacks. Since then, oil prices have drifted lower after the US increased patrols/escort duties to guarantee the safe passage of oil. So far, there appears to be no escalation in tensions observed.

On the supply side, Saudi Arabia is aiming to get agreement on more production cuts at the OPEC meeting in the first week of July. The weekly count of US oil rigs in production showed another slight drop in the week to June 14. The number of rigs in production is now at the lowest since February 2018.

Speculative investors continue to scale back bullish bets on crude oil, being net sellers for a seventh week to June 11, bringing net long position back to the lowest since the week of March 5.

WTI Daily Chart

Source: OANDA fxTrade

NATURAL GAS is continuing its gradual drift lower, a theme that has been in place since the start of the year. The commodity appears to be attempting to find support at the lows earlier this month, with investors weighing up the supply-side situation against a possible pickup in demand, with hotter weather in the US Southeast forecast for the June 22-26 period.

On the supply side, data out of China reported by Xinhua News Agency shows China’s gas output up 12.9% y/y to 14.4 billion cubic meters in May, an acceleration from the 7.9% gain in April.

Agriculturals

WHEAT surged to the highest since August 20 yesterday, following on from the biggest weekly gain in four weeks. The commodity has climbed as much as 32.6% in the past month on supply-side issues as heavy rains delay the start of the planting season in the US.

Speculative accounts have turned bullish on the agricultural commodity as net positioning turned positive after spending 16 weeks with a bearish bias. The last time investors were bullish on wheat was back in February.

US wheat exports survived a scare after Japan announced it will not halt US wheat imports after unapproved genetically-engineered crops were found in Washington State, since it already has tests in place to detect such crops.

Wheat Daily Chart

Source: OANDA fxTrade

CORN is also suffering under severe wet weather conditions, with the US Midwest unseasonably under water. Prices surged to the highest since 2014 yesterday. Speculative investors have been correctly positioned for the move, being net buyers for the past six weeks with net long positions rising to the highest in a year, according to CFTC data as at June 11.

SOYBEANS harvests are also weather-affected in the US, though the harvest in Argentina is now 98% complete and the Buenos Aires Grain Exchange sees exports rising 267% to 7.75 million tons in the 2018-19 season. Prices spiked to a near four-month high of 9.154 this morning but have since eased back to 9.018.

SUGAR is currently retreating from near eight-week highs of 0.1270 touched earlier this morning and is now trading at 0.1261. Speculative investors trimmed net short positions for a second week to June 11, CFTC data shows, and they are now at the lowest since the week of May 7.