Written Commentary
COPPER
Predicting the direction of copper prices remains difficult at present because the market has been unresponsive to many bull and bear developments over the past 10 trading sessions. For example, copper prices failed to rally off a minimally supportive Chinese PBOC stimulus/liquidity injection announcement and despite an ongoing plunge in Shanghai copper warehouse stocks. Justification for thick resistance at recent consolidation high pricing around $4.2150 is solid with the threat of US tariffs against China fixed in the headlines. Certainly, physical supply at global exchanges are working off supply from earlier this year but at present the copper market is hyper focused on demand and not supply. From the high this year Shanghai copper warehouse stocks have declined from 340,000 metric tons to only 120,000 metric tons and from the high this year LME copper warehouse stocks have declined from 320 million tons two 272 million tons.
PRECIOUS METALS
While the gold and silver trade has benefited from a retrenchment in the dollar and signs of lower rates ahead, the fundamental case remains in the bear camp. A fresh bearish element has surfaced this week from talk of Israeli/Hamas cease-fire talks which could have credibility given the lack of direct military exchanges between Israel and Iran lately. Certainly, flight to quality concerns regarding the potential for global trade barriers, talk of market warnings regarding the explosion of US debt and lingering hopes for a December US rate cut provide some underpin to gold prices. Furthermore, it should be noted that gold ETF assets jumped by over 1 million ounces yesterday in a potential sign of bargain hunting after the retrenchment of $82 from the Monday high and more importantly given the retrenchment of nearly $200 from the late September highs. It should be noted that Hong Kong October gold exports to China jumped significantly from September but Hong Kong October “net” gold exports to China fell slightly leaving the Chinese demand impact neutral to slightly bearish. However, with the pulse up in gold ETF holdings overnight ETF holdings have returned within 177,000 ounces of the highest levels since September 2023. Like the gold market, silver prices seemingly found a measure of support/value at the overnight low of $30.00, but the potential for a silver low is higher than a potential technical low in gold as yesterday’s washout saw heavy volume which could suggest heavy long liquidation has already taken place.
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