Commodities ended the month with a mixed performance. April made history with the prices of WTI crude futures below zero for the first time.
Rob Haworth, a senior investment strategist at US Bank Wealth Management, stated that the global economy was sheltered to combat the Coronavirus pandemic. The loss of demand crushed most commodities. Haven assets such as gold and silver were exceptions as investors were trying to find shelter due to fears around market volatility.
The market is still being oversupplied, and improvement requires a return of global economic activity, Haworth said.
Gold gained the most
According to Dow Jones Market Data, gold was the heaviest traded among 23 commodities, since it is an investment haven away from riskier assets. The metal closed at 60.90 on Thursday, down about 1.6% for the month. Gold posted a fourth straight monthly decline.
The metal saw its June contract finish Thursday up by 6.1% for April.
In the unprecedented Central Bank policy, gold, silver, and platinum moved higher.
Closedowns resulted in oversupplied industry and depressed demand for commodities
The S&P GSCI index, which tracks 24 commodities across five sectors, with energy its most substantial weighting, settled at 257.04 on Thursday, up roughly 0.6% for the month.
Governments over the world shut down their economies to minimize the spread of the Coronavirus pandemic. The measures squashed demand for oil and oversupplied the agricultural industry. On the other hand, they provided some support for gold.
Jeff Klearman, a portfolio manager at exchange-traded fund issuer GraniteShares, said that April was better than the first quarter of the year. Steeply falling crude oil prices hurt performance. However, growing base and precious metals prices helped.
Oil prices could go negative again
The US benchmark crude, WTI futures closed in negative territory on April 20. May West Texas Intermediate crude oil contract settled at a negative, -$37.63 a barrel.
According to Dow Jones Market Data, the June WTI contract closed at $18.84 on Thursday. It was down by 8% for the month based on the front-month contract finish on March 31.
Klearman stated that in the market where the storage capacity is oversupplied, negative oil prices make sense. He thinks that it could happen again until demand recovers.
Gasoline futures faced an increase
In contrast, front-month gasoline futures climbed by nearly 22% in April. Haworth stated that the climb was attributed to seasonal factors since the market moved toward the summer driving season.
However, at the US retail level, gasoline prices dropped to more than 10-year lows in several states amid travel restrictions related to Coronavirus.
Copper futures climbed by 5.2% in April. According to Haworth, they reflected the earlier reopening of the Chinese economy. However, China, Korea, and Taiwan have faced the worst economic impacts by Coronavirus.
Prices of food-related commodities declined. Concerns over meat processing plants shutting down affected the market. Futures prices of wheat dropped by nearly 8%, and Corn prices fell by more than 6%.
Klearman expects commodity prices to recover some of their losses once the Coronavirus-related crisis has been left behind. Government fiscal stimulus packages may also help to encourage growth as well as inflation. Both of these conditions can push commodity prices higher.
- Trading Instrument