Despite the rebound in equities and the continuing record bond rally, commodities were surprisingly strong last week when they might have sold off because of the uncertainty about the UK Brexit vote and what it might do to global growth.
Perhaps it was the news that the Bank of England will take action shortly to help soften the blow to the UK economy from the impact of the Brexit vote.
Or maybe it was a belief that the vote might not have that much of an immediate impact – although the way investors piled into government bonds in Japan, Germany, the UK, US and even Australia, tells us there are some very worried people out there.
At the same time while the start of month surveys of manufacturing in China were not all that positive, those for the EU, UK and US showed those economies were travelling well in the lead up to the Brexit vote on June 23.
So oil, gold, copper, sliver, iron ore other metals all ended the week on an upbeat note which was very different to the previous Friday and all the confusion about what the Brexit vote means (we still don’t know).
But that continuing record slide in bond yields in the US, UK, Japan, Germany, Australia and several other developed economies, tells us that big investors remain very wary about the global economy and financial stability and feed the need for a ’safe haven’. And it wasn’t just bonds that were a haven, gold of course got a kick along, but silver did better.
In fact, Comex silver futures saw their largest weekly climb since 2013 last week, hitting a near 22-month high in New York as the US dollar softened and investors sought safety.
As a sign of the weakness in the dollar (which sits oddly with the record lows on Friday for the US 10 year and 30 year bond yields) the Aussie dollar ended the week in sight of 75 US cents, against
the previous week’s close of 74.66 US cents in the midst of the post-Brexit madness and selling.
There’s a touch of ’safe haven’ buying in the Aussie.
September silver futures jumped 96.5 cents, or 5.2%, to settle at $US19.588 an ounce, early Saturday. Prices haven’t been at a level this high since mid-August 2014.
As a result, silver futures prices saw a 10% weekly gain—the largest since August 2013, according to FactSet data.
By way of contrast, Comex August gold futures added $US18.40, or 1.4%, to settle at $US1,339 an ounce in New York early Saturday, the highest close since July 10, 2014.
Gold futures rose a far more modest 1.3% as investors sold futures as share prices recovered. But that was after a solid 7% for the June quarter.
And September Comex copper rose 2.2 cents, or 1%, to $US2.217 a pound, with prices up almost 5% for the week in one of the better weeks for the metal for some time (and copper ignored the indifferent Chinese manufacturing report).
On the London Metal Exchange, nickel futures hit the highest level in nearly eight months on Friday on worries about possible mine closures in the Philippines, while a weaker dollar helped boost metal prices.
At the same time Friday saw aluminium futures touch their highest level in nearly two months while zinc hit another one-year peak.
Three month nickel on the London Metal Exchange soared 5.6% to close at $US9,970 a tonne, the highest since early November 2015.
Reuters reported that the new Philippines mining minister, a committed environmentalist, announced plans on Friday to review all mines operating in the country, the biggest supplier of nickel ore to China.
LME aluminium futures rose around 1% higher to $US1664.50 a tonne, the highest since the start of May. Traders say a sharp fall in Chinese stocks of the metal at the Shanghai Futures Exchange boosted prices.
Zinc ended 2.4% higher at $US2155, a new 12 month high.
LME copper added 1.4% on Friday to finish at $US4911 a tonne.
Lead closed up 3.6% at $US1850.50 a tonne, the highest in over three months, while tin rose 2.5% to end at $US17,470 a tonne.
In energy, US natural-gas futures hit their highest close since May 2015 on Friday as continuing warm weather and rising demand for electricity (to power air conditioners) continues to mop up the oversupply of gas.
August natural gas rose 6.3 cents, or 2.2%, to settle at $US2.987 per million British thermal units on the New York Mercantile Exchange. The settlement was the highest since May 18, 2015.
Prices were up 12.2% for the week as official figures showed a smaller-than-usual weekly increase in gas supplies
Meanwhile, oil futures ended higher on Friday after data showed that the number of US rigs drilling for oil rose for the for fourth week in the last five.
August West Texas Intermediate crude futures added 66 cents, or 1.4%, to settle at $US48.99 in New York up around 2.8% for the week. Prices had posted losses in each of the last two weeks but still rose 26% in the June quarter.
In London, September Brent crude futures climbed 64 cents, or 1.3%, to $US50.35 a barrel, and up about 4% for the week.
