Written Commentary
GOLD / SILVER
Fortunately for the bull camp in gold, today’s US economic reports slate is empty which could tamp down revived interest in the dollar following yesterday’s flow of very favorable US housing and jobs data. In retrospect, the higher high in April gold early Thursday was heavily dependent on the sharp washout in the dollar. Unfortunately for the bull camp, the dollar staged a significant recovery and US treasury yields reached higher highs off further erosion of hope for a US rate cut. While the downside spike in the Dollar might rekindle hope of a downside extension in the Dollar and a currency inspired extension of the mid-February gold rally, respect for the US economy is improving, soft landing talk is being replaced by the avoidance of recession and therefore the Dollar might have forged a key low. Certainly, it is impressive that gold and silver have managed to absorb the virtual removal of a near term US rate cut, but outside market action is now likely to prompt a correction in the coming sessions. Unfortunately for the bull camp the largest gold ETF saw the largest single day outflow of funds since October yesterday with a single day decline of 0.8% which in turn pushed holdings to the lowest level since August 2019.
COPPER
While Chinese equity markets finished with another gain extending a chain of gains to two weeks in duration, a massive 94,803-ton weekly inflow to Shanghai copper warehouse stocks should pop the bubble of the bull case. The massive inflow to Shanghai copper warehouses might have been partially the backup of supply from the long Chinese holiday, but a single week gain of 109.5% is likely to force follow-through selling today. While not as significant, daily LME copper warehouse stocks broke a growing string of daily declines with a minimal increase, but London stocks have still declined in 21 of the past 23 sessions. In a very minimal development, a Chinese house price index contracted by slightly more than expected but that report is discounted as backward looking given the recent cut in Chinese mortgage rates. However, hope for improving Chinese copper demand from earlier this week has seemingly exhausted with this week’s high prompting a significant decline in trading volume and open interest.
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