Written Commentary
GOLD & SILVER
The gold bears were out this morning as worries over Japanese insurers dumping U.S. government bonds, to cover losses related this this week’s earthquakes, sent both bond yields and the dollar sharply higher. This gold sell-off comes as central banks continue to talk about the need for weaker economic data before they discuss rate cuts, and, on que, we saw better than expected employment data in Europe, add to worries of a slower than expected central bank pivot. Furthermore, the trade today could see early selling intensify if US ISM manufacturing data comes in positive as expected, especially with the afternoon release of the FOMC meeting minutes as any pushing back of US rate cut timing is clearly a major blow to the bull case. Gold’s bearish sentiment could easily send gold prices back down to their 50-day moving average support level ($2028). Silver prices are a concern as well as the bears are eagerly watching this potential head and shoulders topping pattern that has been forming since October of last year.
COPPER
The copper bears are celebrating the rumors of Japanese insurers dumping U.S. government bonds to cover this week’s losses from earthquakes. Bears are watching as the dollar rises by its largest percentage since October on higher interest rates putting copper prices at risk. Private estimates out of China have pointed out that regional copper inventories have jumped sharply this week on a lack of demand due to an increase in basis premiums. This lack of demand is telling the bears that the Chinese market can’t pay higher prices for copper just yet. In response to this weak demand, the Chinese government has injected $50 bn into policy friendly banks for infrastructure projects and have pushed up their oil refining quotas for the first several months of the year that have already matched all of 2023’s total quotas. Copper prices broke below their upward trendline support overnight, including their 30-day moving average.
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