Written Commentary
GOLD / SILVER
While gold and silver are oversold both markets lack fundamental justification to withstand constant bearish pressure flowing from treasury and currency market action. Certainly, short-term technical indicators in gold and silver are dramatically oversold with declines of $37 in gold in eight trading sessions and declines of three dollars in silver in just three trading sessions. However, the breath of the bearishness toward gold is justified with market potentially poised to post the longest consecutive daily losing streak in seven years today. Unfortunately for the bull camp precious metal and physical commodity prices will remain under the shadow of action in the financial markets especially with additional US jobs data scheduled for release this morning. While the trade expects a slight uptick in initial claims from last week the prior two weekly claims readings were the lowest since January, and therefore a number at or below expectations will result in the lowest three-week claims tally of the year. In fact, it could take a noted rebound in treasury bonds above 112-24 and a trade below uptrend channel support in the dollar at 105.84 to prompt noted profit-taking by gold and silver shorts. In the end, there is the prospect of a temporary bounce today if the pendulum on the view toward the US jobs market swings back toward slowing, as that could temporarily squelch the unrelenting and perhaps overdone selloff in treasuries. On the other hand, reports that bond vigilantes are attacking US debt instruments could result in a flight to quality rally in gold and silver.
COPPER
With another inflow to LME copper warehouse stocks overnight and residual concern of further financial market pressure on commodities hanging in the air and likely to continue to generate spillover pressure today, seeing copper hold above yesterday’s low of $3.5490 is unlikely. The bear camp should also be emboldened by recent the internal fundamental news flowing from the International Copper Study Group estimate yesterday which reduced world refined copper supply and demand balance to a deficit of only 27,000 tonnes for 2023. More importantly the ICSG predicted a large surplus forecast of 467,000 tonnes for next year. With the lower low yesterday in December copper definitively extending the October washout, it is clear copper is trading like equities with good US data bad for copper prices. Apparently, very favorable US private jobs news from Tuesday was countervailed by a smaller than expected addition of jobs from ADP yesterday. Therefore, US initial claims later today could also be seen as a very critical demand signal and trend setting development. Seeing copper react to second-tier data highlights the absence of China from the market.
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