Written Commentary
COPPER
The slight pause in the dollar overnight gave copper bulls a chance to regain some of this week’s losses. Despite European industrial data coming in much weaker than expected and German Factory data handily missing estimates, copper was still able to rally. Speculation of possible rate cuts due to poor economic data left the copper bulls with the upper hand. The Chinese are trying to assure investors that Moody’s recent talk of downgrades is unfounded. But that did not stop Moody’s from downgrading the outlook for eight large Chinese banks overnight, from stable to negative. A downgrade could have a major impact on Chinese banks ability to leverage their balance sheets. At the same time Rio Tinto announced that it has seen a major pick up in Chinese infrastructure investment, while the IMF has upgraded their Chinese GDP forecasts for 2024. Rio Tinto also announced new guidance yesterday, showing that they expect to increase mined copper production to between 660,000 and 720,000 tonnes, up from 2023’s estimates of 590,000 to 640,000 tonnes. This comes at a time when other miners are finding it more and more difficult to produce.
GOLD & SILVER
Gold prices rallied overnight as bulls took advantage of the lull in the dollar. Although interest rates were up marginally overnight the bull camp was spurred on by continued hopes of a rate cut. Bulls will be watching this morning’s ADP data for evidence of further weakness in the US economy that might warrant Fed dovishness. The Perth Mint reported that gold sales jumped 26.52%, to 53,520oz this month, as the demand for physical bullion surged. Silver rallied early in the overnight session before giving up its gains following weak German Factory data. Silver mine production could rise by 3% next year, following this year’s 1% rise according to a research note from Bloomberg. This is expected to offset this year’s 3% drop in recycled silver. This morning’s economic data will give the bulls a chance to look for more bullish themes. A weaker than expected ADP Employment number might be seen as taking the Fed into a more dovish stance going forward.
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