Written Commentary
COPPER
While the copper market on Monday once again posted a major range up move, it reversed sharply providing another blowoff top type formation. However, the market has managed to overcome similar “blowoff top” type action recently. In fact, it appears that copper is starting to flow into LME copper warehouse stocks which could be a sign of a frothy market and a sign that physical owners are beginning to step in and capitalize off record pricing. However, the trade remains concerned about Panamanian, Chilean, and Peruvian supply flows. On the other hand, high prices are likely to stimulate scrap supply and could begin to reduce demand from already high-cost green energy demand. In a positive demand development Chinese April refined copper output jumped sharply by 9.2%.
GOLD & SILVER
Clearly, volatility has expanded and is likely to stay elevated with gold and silver continuing to march to their own drummer. It should be noted that gold ETF holdings are beginning to rise consistently, with last week posting an inflow of 230,227 ounces, and with the addition of 135,000 ounces in just the last two sessions. However, in addition to a need to balance yesterday’s sharp run up, the market saw Chinese bullion imports slow last month reportedly due to record prices. On the other hand, it should be noted that yuan silver futures prices posted a record in China. Apparently, Chinese gold imports declined to 136 tons last month for a 30% decline from March and they posted the lowest monthly import tally this year. However, Russian central bank gold holdings reportedly increased by 5.1 tons providing an offset to the drop in Chinese gold demand. A portion of yesterday’s rally might have been attributable a US Fed comment suggesting that US rates are currently restrictive has that ever so slightly pushes the rate policy pendulum in favor of the doves. It should be noted that the silver market is reportedly seeing an increase in demand from the solar industry providing a short-term overbought market with fresh fundamental support. It should be noted that gold and silver at times showed definitive divergence with gold softening and silver generally holding its gains. Certainly, the gold market is significantly overbought in spec and fund categories while the silver market has a smaller relative long position and therefore it should retain significant buying capacity if conditions warrant.
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