Written Commentary
GOLD & SILVER
With a weaker US dollar and an initial higher high for the move in Bitcoin, outside market forces favor the bull camp in gold and silver. Certainly, gold will continue to draft support from the long list of flight to quality issues, but signs of an overbought condition in the Indian gold market is concerning. With growing concerns of exploding gold loans, the Reserve Bank of India has instructed the country’s largest gold loan non-bank finance company to halt fresh gold loans, and there are reports that Indian buyers are experiencing price shock. Another sign of price shock is seen from outflows from gold and silver ETF holdings yesterday, with silver holdings dropping by a massive 4.5 million ounces. While there will be two US inflation related reports today, the main report for gold and silver this week will be Thursday’s US PCE report which we think will leave inflation concerns in place but not radically changed. However, we expect gold and silver will see residual spillover support from bullish sentiment toward bitcoin after yesterday’s gain of 8.5%. Looking ahead to today’s action, the gold market will likely face a temporary recovery in the dollar following a very modest rebound in US durable goods.
COPPER
With a lower low for the move early today, the copper market did not see upbeat comments from the Chinese premier downplaying the threats against the Chinese economy as realistic. In fact, sentiment toward China failed to improve despite indications yesterday from top Chinese officials indicating the country would now work hard to facilitate foreign business ventures. On the other hand, Chinese equity markets overnight posted some gains, the dollar is trading lower and LME copper warehouse stocks posted a modest decline. However, even with a positive US durable goods report this morning, the path of least resistance may remain down in copper. Unfortunately for the bull camp the Chinese currency has weakened overnight thereby offsetting the potential support from a weaker US dollar.
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