Written Commentary
COPPER
Headlines touting the largest single day washout in history certainly punctures bullish sentiment and will likely reduce bargain hunting buying in the near-term. In fact, December Copper has now posted a high to low decline of $1.62 in just five trading sessions with that massive washout facilitated by a very burdensome net spec and fund long position above 60,000 contracts. However, despite three negative Chinese PMI readings over the last 24 hours, a shift into negative macro-economic environment from new tariffs and collapsing technical signals December copper appears to have found some value around the $4.40 sent level. Given the prospect of further extreme price volatility, classic supply and demand news like falling exchange stocks (Shanghai weekly stocks down 1.2% on the week) are unlikely to impact prices. On the other hand, overnight China indicated their 2025 copper production would hit a record despite feedstock hoarding issues seen just ahead of feared tariffs and that should discourage buyers. It should be noted that China produces half of the world’s refined copper and country is expected to see its output increase between 7.5% and 12% this year alone. It should be noted that COMEX copper warehouse stocks have exploded this year from under 100,000 tons to 258,000 tons in the latest report.
GOLD
Obviously, the path of least resistance in gold is pointing down with December gold this morning remaining in a pattern of lower highs and lower lows. Fortunately for the bull camp, gold open interest has plummeted from the July high trade above $3,500 suggesting the current liquidation wave should remain orderly. On the other hand, a negative gold price reaction to the announcement of 62 new reciprocal US tariffs and in the face of a jacking up of tariffs on Canada suggests the gold market clearly lacks bullish sensitivity. Therefore, December gold is likely to retrench further until investors and traders see value with prices below $3,300. Other issues supplying pressure to gold is a growing view in interest rate markets that Fed is unlikely to act until the fourth quarter.
SILVER
The charts in silver remain patently bearish with December silver prices “ranging down” sharply this week despite silver entering the week notably oversold from last week’s washout. Like gold, the silver market appears to be on track to retest consolidation low support located down at $36.00 with bullish fundamentals temporarily delegated to a backseat. Furthermore, given additional tariffs headwinds for the global economy the physical demand outlook for silver is back in focus.
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