Written Commentary
GOLD / SILVER
Fortunately for the bull camp in gold and silver, the dollar has remained near five-day lows as the US economic outlook has deteriorated which has kept some measure of rate cut hopes alive for the first half of 2024. Indirectly the gold market should see minimal support from the very aggressive cut in the Chinese mortgage reference rate overnight as that tamps down fear of a Chinese collapse and global deflation. Unfortunately for the bull camp, gold ETF holdings continue to decline with an outflow last week of 550,951 ounces bringing the year-to-date outflow to 3.1% in less than two months. However, with an empty US scheduled report slate today, the trade will likely shift its focus toward tomorrow afternoon’s US Federal Reserve meeting minutes release, but recent dialogue from the Minneapolis Fed suggested significant evidence of softening inflation over months will be needed to cut rates. The technical condition of gold is also bearish with the recovery off last week’s lows forged in the face of declining open interest and very low trading volumes. With the silver market fresh off a $0.56 rally, failing to hold its 50 day moving average breakout from last week, the onus is on the bull camp to prove key support at $22.84 can hold.
COPPER
In retrospect, the copper market seemed to anticipate the aggressive support from the Chinese central bank for the Chinese property sector as copper prices last week posted a low to high rally of $0.15 in the face of disappointing global economic data and periodic adverse outside market influences. However, the move to cut Chinese mortgage rates by the largest amount ever combined with a very consistent and increasingly more important declines in daily LME copper warehouse stocks provides both supply and demand support. It should be noted that PHP will release earnings today with the company indicating that China will have to do even more to resurrect their economy. In fact, some economists see the very aggressive cut in mortgage reference rates as too late with other economists seeing the aggressiveness as “alarming”. On the other hand, Chinese lunar new year holiday travel reached the highest levels since before the pandemic which countervails some of the lingering property sector fear.
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