Written Commentary
GOLD & SILVER
With both gold and silver posting new all-time high prices this morning bullish sentiment continues to burn hot. While we suspect an “investing trend” is still the primary fuel for the current leg up, “tit-for-tat” US/Chinese port fee levies have escalated the trade war and in turn boosted flight to quality buying. Even the central bank gold buying theme is present this morning with talk of ongoing central bank gold buying from the World Gold Council last week prompting some traders to suggest central bankers are increasing gold holdings at the expense of foreign sovereign debt holdings. From the supply side of the equation, South Africa August gold output declined by 3.6% on a year over year basis with South African August PGM production also declining by 3% on a year-over-year basis. Therefore, gold supply is reiterated as a supportive element of the bull case again even if the supply shortage in gold is not as severe as the supply situation in silver! In fact, even though total silver ETF holdings overnight declined by 392,443 ounces (a minimal decline of 0.1%) total silver ETF holdings remain near the highest level since May 30th of 2022. Therefore, it is not surprising to see silver futures plow through and extend well beyond the old record high silver price from the 1980s! The London silver trade continues to suggest a serious “short squeeze” is propelling silver sharply higher as reports indicate there is a global hunt underway for physical silver supply.
COPPER
In retrospect, after several weeks of definitive upside action, the copper market appears to have forged a technical blowoff top following last week’s explosion. Furthermore, the market has displayed four straight sessions of very wide trading ranges which can be indicative of a market facing significant uncertainty associated with a major trend decision. Clearly, the latest US/Chinese trade barbs raise concerns of slowing as the prospect of 100% US tariffs on Chinese goods looms over the markets following both countries implementing port fees. However, copper should be supported from Rio Tinto suggestions that they expect strong year-end iron ore demand from China and from news that Freeport Indonesia has been forced to idle operations at a smelter due to the lack of copper concentrate supply flow from the Grasberg mine shutdown. However, it should be noted that Rio Tinto also saw third quarter copper production jump sharply (by nearly 10%) over year ago levels in a clear sign that one of the world’s largest copper miner is attempting to make up for the outage at the Grasburg mine.
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