Written Commentary
GOLD & SILVER
While there was continued divergence between gold and silver yesterday, gold was able to hold its ground in positive territory and finished Thursday with a mild gain. In contrast, silver was the weaker market as it closed with a heavy loss. The declines in silver were outsized and were likely the result of profit-taking by aggressive Asian buyers over the prior two weeks. It should be noted that Chinese silver prices reached a significant premium to spot prices recently resulting in Chinese buying international silver and reducing their risk to the weakness in their currency. Thursday’s US economic data featured first quarter PCE and core PCE reading that were roughly in-line with trade forecasts, but resulted in a very slight uptick in rate cut expectations which were also boosted by minimal weakness in the pending home sales and weekly increases in both initial and ongoing claims. A possible cause of the sharp selloff in silver came from news that the US would limit AI chip sales to China which rattled risk appetites, and likely put additional pressure on the silver market. Unfortunately for the bull camp overnight Chinese manufacturing PMI for May dropped sharply reducing prospects of physical demand for silver ahead. Despite the corrective action in gold from the middle of the month, gold looks to finish with both monthly and weekly gains. However, today’s US PCE reading could result in gold and silver finishing the week on a much more positive note as yesterday’s quarterly PCE data leaned slightly in favor of softening inflation.
COPPER
With both manufacturing and nonmanufacturing PMI readings from China falling overnight the copper market is fortunate to have held yesterday’s low and in turn forge a double low at $4.6205. In fact, the Chinese manufacturing PMI reading for May came in one full point below expectations and reached a three month low. Unfortunately for the bull camp negative news from China was not limited to PMI readings with Shanghai copper warehouse stocks jumping by more than 20,000 tons which means Shanghai copper warehouse stocks are now at a 50 month high. While Copper prices remain on-track for a third monthly gain in a row, both supply and demand news from China favor more downside.
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