Written Commentary
COPPER
While copper mining company Rio Tinto indicated the Chinese economy looks to be stabilizing global industrial activity is showing signs of slowing outside of China and that market buzz is largely responsible for the downside breakout in copper prices overnight. In fact, if today’s US industrial production and capacity utilization readings match expectations we see further selling in copper. Certainly, a wave of dovish speeches from US Fed members this week could be supportive, but if the speeches continue to play up the idea of a vulnerable economy, copper could extend on the downside. In conclusion, market sentiment remains very bearish, but the market probably retains selling fuel on the sidelines. Furthermore, Goldman Sachs indicates that copper restocking is likely, and they projected general weakness across the base metal markets. Oversupply continues to be a major headwind for copper with LME copper warehouse stocks at two-year highs as they have tripled in size since July 24th.
GOLD / SILVER
While outside market moves are not significant, gold is posting minimal gains despite strength in the dollar and weakness in treasury prices. However, some international traders see risk premiums falling with the US presidential visit to Gaza with the idea that diplomatic efforts could calm the situation. Unfortunately for the bull camp global economic activity is showing signs of slowing with global manufacturing softening and demand for industrial metals declining and that casts a shadow over precious metal markets. Therefore, today’s US industrial production and capacity utilization readings will take on added importance as slowing can sometimes foster deflation in commodity prices. On the other hand, a flurry of Fed speeches ahead culminating with the Fed chairman speech on Thursday could soothe treasury market volatility, undermine the dollar, boost treasuries, and lift equities which could help cushion physical commodities.
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