Written Commentary
GOLD & SILVER
Overnight gold ETF holdings exploded to the highest level since November 2020 with silver ETF holdings reaching the highest level since June 2022. In fact, silver ETF holdings jumped by a startling 1.1% in a single day with a 9.2 million ounces inflow and that could propel silver toward $55.00 an ounce. However, a continued pattern of very large daily inflows could be an early sign of an impending blowoff top. It should be noted that stories from Bloomberg overnight are drawing parallels with a major explosion in gold prices in 2011 when gold finished a decade-long rally with a two month trading range of $324 which at the time represented a 20% reversal. With current gold prices more than double the 2011 peak and gold posting only one significant two month correction since October 2023 of $245 or a 9.5% reversal the market is overdue for a washout. An even larger percentage “blowoff top” was seen in December 1979 record rally with gold prices rallying 80% in one month. Therefore, there is historical precedence for an extremely wild trade in gold ahead.
COPPER
Despite copper breaking down aggressively last week, the trade seems to have rejected the washout and remains fixated on unending global supply tightness. In fact, the trade continues to see real knock on impacts from the Grasberg mine disaster as demand channels shift and copper concentrate supply is at a premium. While we think the prediction of a 24% surge in global copper demand over the next 10 years is clearly possible, given the unknown impact from a global explosion in data centers and further growth in emerging markets, the near-term demand outlook is not as supportive. Recently there have been rumblings of a stabilization in the Chinese economy but given a heating up of US/Chinese trade tensions again and softer than expected Chinese inflation readings overnight we are growing very suspicious of optimistic Chinese economic forecasts. An indirect impact on copper could be seen from the US Aluminum Association announcement yesterday seeking to ban the export of scrap aluminum cans to China as that could foster other organizations to step up pressure on China.
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