Commodity Corner: Morning Comments

Good morning,


DXU9  95.570  +0.083                           GCQ9  1429.4  +11.2                                                             ESU9  2949.25  -2.75                            CLQ9  57.88  -0.02


Amidst all of the uncertainty in the markets, with the aggressiveness of global monetary policies being questioned, with equities trying to push higher, but struggling to do so, with the energy markets in flux with all of the Middle East tension and ahead of next week’s OPEC meeting, commodity markets awaiting trade resolutions (Trump and Xi meeting at G-20?) to have a better view of potential demand while weather induced supply concerns, leaves one question out there for the market:  who ya gonna call (or, where ya gonna invest)?  Goldbusters…Gold having withstood numerous tests of its 200 Day Moving Average at the end of May/beginning of June, continues its move to some of the highest prices observed in the past ten years.  This has had many technicians clamoring for a breakout to the upside for gold over the past week or so.  With all of the mentioned uncertainty out there, the market is trying to decide how to attack the second half of 2019.  Gold appears to be the asset of choice, for the moment.  The commodity research arm of a Wall Street bank put out a call for gold to test $1450.  The overnight trade in the lead contract (CLQ9) saw prices reach $1442.9.  At least a test of the level seems likely.  One slight word of caution, as all the media outlets are now running with the trading breakout in gold, it might be a case of old news for those actually trading the market.  Possibly not a bad time to book some profits if one got on board this train, especially as we move into quarter end.  The uncertainty is far from over, so gold may not have much of a setback, but given the magnitude of this rally, a decent sized correction wouldn’t be a big surprise. 


Gold is the primary story facing the markets this morning.  Equities are a touch lower, oil has been trading around unchanged levels, with perhaps a slightly lower bias.  Not shocking, as Tuesdays and Wednesdays bring production and inventory data from the US, where the norm has been strong numbers (last week was a bit of an exception).  As mentioned, Middle East tensions, with President Trump issuing new sanctions on Iran and questions about what will come out of the OPEC+ meeting.  With production quotas likely to be a major topic of discussion, oil prices will most likely be range bound ahead of this. 


Grain prices are higher this morning.  Yesterday afternoon’s crop conditions and progress reports showed a decline in crop conditions, along with planting numbers behind the averages, as June comes to a close.  Not really a new story, but the splash of reality this season’s weather has brought to the grain markets typically brings a bid to prices.  With late plantings, and now as the crops emerge with the severe storms still out there potentially causing damage, the market continues to lower its expectations for production.  Aside from weather forecasts, the next big piece of news for these markets comes Friday with the planting intentions and quarterly stocks reports (estimates on attachment).  There could be some position squaring in front of this and also with month end on Friday. 


All of the other soft commodity markets are higher today, even with the dollar a touch firmer this morning.  The large decline in the dollar since last week’s Fed meeting has provided price support to commodities denominated in dollars, as it makes the goods cheaper in the export arena.  The Brazilian real has had a nice run up as well of late, making it less enticing for Brazilian producers to bring products to market.  Global monetary policies and FX levels will certainly be discussed at the G-20 meeting this weekend in Japan.  Any sharp changes to the dollar index wil quickly work its way into the commodities space. 


Copper, interestingly, has appeared to decouple from the equity market a bit.  Perhaps it is the bid in gold that is carrying the other metals markets higher.  It also may be a sign of hope that something positive comes out of the meeting between Trump and Xi.  Past trade negotiations would suggest that is not likely, but there is always hope.  The market is just looking for something positive to take away here.


Another reminder, Friday is First Notice Day for July 2019 agricultural futures contracts.  Any LONG positions on the books on June 28 are subject to being stopped for exchange delivery.  To avoid this potential risk, all LONG July ’19 positions should be liquidated or rolled to another contract by the close of business on Thursday, June 27.         


Technical Moving Averages:

Product               50 day                100 day               200 day

SX9                      888.25                   915.25                   924.0

CZ9                      412.5                     404.25                   401.75

WU9                    483.75                   487.0                     517.5

KWU9                  445.0                     460.5                     506.0

MWU9                545.25                   556.25                   578.5

SMZ9                     315.2                     317.5                     318.8

BOZ9                     28.44                     29.60                     29.76

CLQ9                    59.57                     59.30                     59.66

GCQ9                   1309.3                   1314.9                   1287.6

LHQ9                   90.635                   88.560                   84.920

LCQ9                    108.860                 112.485                 112.915

KCU9                    97.10                     100.50                   108.85

CCU9                   2400                       2345                       2313

CTZ9                    70.04                     72.25                     74.24

SBV9                    12.56                     12.87                     12.99

JOU9                    105.20                   114.30                   127.25

HGN9                  275.65                   282.45                   278.95


Have a good day,





Michael Clifford


141 W Jackson Boulevard                             

Ste 1065                                                              

Chicago, IL 60604                                              

Trean Group, LLC