Written Commentary
GOLD & SILVER
The gold and silver trade is euphoric over what the trade is calling an official pivot by the US Fed toward cutting interest rates as the rallies from yesterday’s lows are quite profound and appear to have momentum. As in other markets, near-term overbought technical signals in gold and silver should be ignored by the markets today, as traders continue to embrace euphoria which is likely to extend through today’s session. Obviously, the sharp slide in the dollar and the precipitous drop-in interest rates combined with a dovish Fed is a perfect bullish storm which is likely to be capable of attracting buying fuel despite a quickly expanding and overdone net spec and fund long positioning. Certainly, euphoria from rate cut hopes has resulted in bearish euphoria toward the dollar and bullish euphoria for treasury prices which looks to entrench optimism in gold and silver for at least another trading session. In fact, global central banker dialogue looks to uniformly favor the newfound dovish posture adding another bullish element to the equation. Sentiment is so bullish that contradictory readings from higher US import and export prices, a surprise decline in initial or ongoing claims and or a rise in US retail sales is unlikely to halt the rally.
COPPER
Not surprisingly, the Fed pivot from on hold to easing has resulted in a wave of economic euphoria which in turn has resulted in sharp declines in the dollar, plunging interest rates, surging equity prices and that clearly helps improve the global copper demand outlook. In fact, the fear of slumping Chinese copper demand temporarily forgotten as a rising tide of global economic euphoria looks to lift all physical commodity market boats. Unfortunately for the bull camp, a Chinese communist party annual economic work conference did not provide hints of fresh stimulus, but that news has not achieved front page headline status today. In a longer-term supportive development, CITI has suggested massive demand for metals like copper will materialize if global environmental targets for the renewable energy transition are realized. Despite the markets lack of interest in Central and South American supply threats earlier in the week, the newfound respect for the potential for improved global copper demand makes that supply tightness threat an issue again today.
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