Commodities Wrap 19 August: Metals Roar Back as Platinum Jumps 4.4 Percent

By The Edge Research Team

Wednesday sharply reversed Tuesday’s metals rout: the complex that broke a day earlier roared back as long-term US yields fell and the dollar slid, while energy held its bid, per CNBC. Platinum jumped 4.42 percent in the board’s largest move, gold reclaimed 2.82 percent, and 15 of the 17 contracts tracked here settled higher, our calculation, with only gasoline and coffee lower. The turn came after the US Treasury Department said it would at least double the size of its government debt repurchases, aimed at the 10 to 30 year part of the market, per CNBC.

Agriculture, energy and metals figures are late-session quotations captured between 18:19 and 18:37 GMT and compiled just after 18:35 GMT, and should not be read as official settlement prices. Currencies, the volatility index and Bitcoin are intraday readings, while United States Treasury yields referenced in the text are intraday levels per CNBC, with Wednesday’s official curve publishing after the New York close.

In energy, crude firmed while the products split. Natural gas rose 1.37 percent to 2.814 dollars per million British thermal units and WTI for September 1.05 percent to 85.83 dollars a barrel, with ICE Brent for October up 0.66 percent at 91.62 dollars, as Washington and Tehran continued to give conflicting accounts of conditions in the Strait of Hormuz, per CNBC. ULSD heating oil edged up 0.05 percent to 4.4523 dollars a gallon and RBOB gasoline was the complex’s only decline, down 1.41 percent at 3.2551 dollars, per CNBC. Crude’s bid held even though the US Energy Information Administration reported a 4.4 million barrel build in commercial crude inventories to 428.8 million barrels for the week ended 14 August, with gasoline stocks up 0.7 million barrels and distillates down 1.5 million, per the EIA’s weekly balance sheet.

In metals, the rebound was fully uniform, all five higher. Platinum jumped 4.42 percent to 1,810.50 dollars an ounce, palladium 3.14 percent to 1,334.20 dollars and COMEX gold for December 2.82 percent to 4,545.30 dollars, per CNBC, with silver up 2.79 percent at 65.825 dollars. Copper edged up 0.05 percent to 6.496 dollars a pound, per CNBC. The move tracked the rates market directly: the 30-year Treasury yield fell more than 7 basis points to 5.206 percent intraday after the Treasury’s buyback announcement, and the 10-year shed more than 4 basis points to 4.658 percent, per CNBC, while the dollar index dropped 0.79 percent to 98.873. Lower long yields reduce the opportunity cost of holding non-yielding precious metals, and a weaker dollar eases the currency headwind for buyers outside it, two channels pulling the same way, our reading.

Agriculture was broadly higher with the softs again supplying the outlier. Cotton rose 3.44 percent to 88.35 cents a pound, wheat 2.39 percent to 697.50 cents a bushel and corn 2.05 percent to 498.00 cents, with cocoa up 1.89 percent at 6,031.00 dollars a tonne, soybeans up 1.68 percent at 1,237.25 cents and sugar up 0.46 percent at 17.55 cents, per CNBC. Coffee was the group’s only decline, giving back 1.28 percent to 328.20 cents after Tuesday’s 4.31 percent jump, per CNBC.

In rates and the wider market, everything that had been charging risk premium stood down at once. The Cboe Volatility Index fell 4.92 percent to 15.06 intraday, per Cboe, and Bitcoin jumped 5.63 percent to 68,241.75 dollars, per CNBC. The euro rose 0.81 percent to 1.1668 and the yen strengthened 0.79 percent to 158.36 per dollar, per CNBC, with the Kuwaiti dinar at 0.3071. Federal Reserve minutes released during the session showed many participants assessed that policy tightening would likely be necessary if inflation did not decline, with three dissenters having voted to raise rates at the July meeting, per CNBC, yet the session traded on the Treasury’s buyback move rather than the minutes, our reading.

Energy, late-session 19 August, ranked by change

Metals, late-session 19 August, ranked by change

Agriculture, late-session 19 August, ranked by change

Currencies, intraday 19 August

US Treasury yields, Tuesday 18 August official closes, for reference, ranked by change

Volatility and crypto, intraday 19 August, ranked by change

Why it matters: Wednesday showed what the metals rout of Tuesday actually was, our reading: a rates trade wearing a commodities costume. The moment the Treasury said it would at least double its longer-dated debt buybacks and the 30-year yield broke lower, every precious metal that had been sold on the way up in yields was bought back, platinum hardest, and the dollar’s 0.79 percent slide amplified the round trip. That the rebound arrived on the same day hawkish Federal Reserve minutes showed participants weighing further tightening makes the point sharper: the session’s reaction suggests long-end conditions, not the policy rate, were what the market was trading on the day, our reading. Energy stayed on its own clock, holding its Hormuz premium with crude firm through a 4.4 million barrel inventory build and the products mixed, and the softs kept trading their own weather in both directions, coffee giving back a slice of Tuesday’s jump while cotton led the agricultural board higher. In the metals and in volatility, Wednesday is Tuesday’s mirror image, five of five metals recovering what five of five had lost while the volatility index gave back its rise, and mirror-image days argue the positioning, not the fundamentals, is doing the driving.

Outlook: The markers from here are whether Wednesday’s official Treasury curve confirms the intraday break lower when it publishes after the New York close, whether gold holds its reclaimed ground above 4,500 dollars once the buyback effect is priced, and whether Brent’s grind toward 92 dollars extends on the strait’s conflicting signals now that the week’s US inventory build has been absorbed, our reading. The energy and metals rows are checked against the exchanges’ published settlement pages in the next-morning confirmation pass.

Sources: CNBC; Cboe; United States Energy Information Administration; United States Department of the Treasury; Central Bank of Egypt.

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