Written Commentary
GOLD & SILVER
Like a broken record (with long string of daily new records) gold continues to explode with December gold overnight approaching the psychological $4,400 level. Upside momentum is obviously reaching very extreme levels with Reuters overnight suggesting this week’s gains will be the largest since the financial crisis back in 2008. However, we do not see a “top” in today’s action with bullish sentiment continuing to expand in the form of fresh very lofty price forecasts from analysts. On the other hand, when and if the markets roll over, we suspect they will fall off a cliff and those with large profits should bank. Pigs get fat and hogs get slaughtered! In other words, while significant gold price projections continue to flow after one of the most prominent bank CEOs of our era suggested gold could reach $5,000 or even $10,000! While gold ETF holdings saw an inflow of 360,339 ounces yesterday, current holdings posted a massive single day slide earlier this week of roughly 2 million ounces and overnight silver ETF holdings fell a startling 10 million ounces which suggests to us that some fund managers (smart money) might have decided to bank profits. This morning silver ETF holdings are 10 million ounces below the October 13th level, and many short-term technical signals have been flashing red over the last two trading sessions. In fact, RSI readings in gold are approaching levels seen into the early October correction of $120, but the silver market does not have a tight correlation with its RSI readings.
COPPER
Like the precious metal markets the copper market has broken out to the downside on the charts and forged a new low for the week. In addition to daily evidence of global slowing from available economic report releases, the copper market is under some pressure this morning from rising credit risk perceptions in the US. However, historically the copper market sees global slowing as less troublesome than evidence of Chinese slowing. While the purpose of increased Chinese metals exports is unclear (excess production, excess reserve building moderation or fears of slumping domestic demand) the news from China is bearish but diffused because of the Chinese holiday. We suspect excess production combined with very attractive global prices has fostered exports from China which doubled last month.
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