Written Commentary
Gold and silver continue to fall from favor despite a series of hot inflation readings from the US and Europe. Furthermore, precious metal markets remain out-of-favor today despite very supportive outside market influences like a sharply lower dollar and incremental declines in US treasury yields.
GOLD
With a fresh lower low and the lowest price since May 29th August gold remains in a liquidation wave. In fact, despite the $200 slide from the mid-month high short-term technical measures remain in “sell mode”. Apparently, the trade sees the potential for progress in US/Chinese trade talks and that has added to the latest selloff. However, hope for progress in US/Chinese trade negotiations is fraught with peril with the market’s recent optimism on a trade deal centered on negotiations for rare earth shipments to the US and not on a balancing of the tariff playing field. Adding to the downward bias is widespread selling of gold company shares with declines in the majors yesterday posting single day declines of 3.4% and 4.8%.
SILVER
Not surprisingly, the silver market continues to hold up better than gold as the primary bull force in silver is classic supply tightness prospects and perhaps long silver/short gold speculation. While it seems, suspicious silver retains hope for improving demand without expanding supply. Adding to the prospect of respecting support at $36.00 in September silver is the overnight addition of 1.5 million ounces of silver ETF holdings.
COPPER
On the week Shanghai copper warehouse stocks declined by 19,264 tons or by 19.1%. Shanghai copper stocks are approaching the May 9th low, which was the lowest reading since the week of January 10th. LME warehouse stocks fell by 1800 tons overnight, adding to the supply squeeze theme. Fortunately for the bull camp the most recent net spec and fund long position reading from the COT report suggest the market retains speculative buying capacity. It should be noted that Chinese copper smelters managed to negotiate better TS/RC rates (basically breakeven) from Antofagasta which many analysts see as a sign of copper concentrate supply tightness ahead. In the long run a lack of profitability for Chinese smelters should cut output of refined concentrate supply! The woes of Chinese smelters are largely the result of unnecessary additions to capacity put in place from lofty demand projections. Bloomberg pegs the global copper concentrate deficit at 1.1 million tons this year and 2.6 million tons next year. Another key development overnight came from a prediction of a 12% growth in Chinese 2025 refined copper output from an industry source.
Interested in more futures markets? Explore our Market Dashboards here.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
