Written Commentary
GOLD & SILVER
The precious metals have stayed within a fairly tight trading range and are holding onto a mild positive tone coming into this morning’s action. A pullback in the Dollar has provided gold and silver with early support in front of this morning’s critical US inflation data after gold and silver moved below their 200-day moving averages yesterday. Expectations for a soft US CPI report later today should strengthen the bull case if the report matches expectations of a gain of 0.1%. While we may be reading too much into the situation, the financial markets have been factoring in a US rate cut in the first quarter for several weeks and today’s report could be the end of the inflation threat, or it could leave the inflation threat alive but with a very slow pulse. In the current situation, we discount the potential for an upside surprise in the CPI report which could result in gold and silver retracing a portion of the December washout.
COPPER
The copper market has held within a relatively tight range coming into today’s action as it is holding onto moderate early gains. While there have been fresh signs of slowing Chinese activity, sluggish November inflation data and softer Chinese crude oil imports, the Shanghai Composite posted a third daily gain in a row today which provided copper with carryover support. In addition, a large daily decline in LME copper stocks has given prices an additional boost early today. While it is possible that copper will see a significant reaction to the European and US inflation readings, technical signals remain somewhat bearish with the close last Friday under the 200-day moving average followed up by a close below the 200-day moving average again yesterday.
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