Written Commentary
GOLD / SILVER
With a fresh lower low and the lowest trade since December 13th in February gold overnight, the downtrend of the last two weeks looks to extend. Certainly, the gold bulls were initially heartened by the failure to sustain dollar gains after a better-than-expected US jobs report but given the lack of definitively bullish internal fundamental storylines for gold, the bull camp “needs” a definitively weaker dollar. Not surprisingly, investors remain cool toward gold with ETF holdings last week falling by 349,662 ounces leaving holdings down 0.4% early in the new year. Given the bearish bias in the trade, a discounting of the increase in Zimbabwe central bank gold and currency holdings and a lack of interest in reports indicating Zimbabwe gold production in 2023 fell by 15% is not surprising. The gold market is also discounting news of two mine closure’s last week from accidents. Yet another bullish force discounted by the trade this morning is news that the Chinese central bank added to its gold reserves last month leaving their gold holdings higher for 14 straight months and resulting in a net increase of approximately 225 tons last year. While central bank gold purchases of gold offset huge drops in ETF and retail investor interest in gold, that only leaves the trade with a minimal increase in demand.
COPPER
Despite overnight news of an 8.1% decline in December copper exports from Chile (the world’s largest copper producer) and yet another decline in daily LME copper warehouse stocks, March copper has remained below its 200-day moving average. Apparently, the copper trade remains concerned about the Chinese economy and therefore is concerned about Chinese copper demand. With the next key Chinese data point new loans for December released tomorrow evening and expectations calling for a significant jump in loans, it is possible March copper will attempt to consolidate around $3.80. However, the prevailing bias is down with the last COT positioning report showing a net spec and fund long of consequence leaving the market capable of further stop loss selling. Even global copper demand expectations continue to soften with German Industrial Orders coming in lower than expected, euro zone retail sales, consumer confidence and industrial confidence all holding in contractionary territory and therefore the bear camp should remain confident.
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