Written Commentary
GOLD / SILVER
Gold and silver face a critical “focus” junction today with action in the dollar likely to support, while US data and misguided/overstated disinflation predictions undermine sentiment. However, we favor the downward tilt with the euphoria from the end of the historic US interest rate hike cycle fully injected into gold and silver prices with the rallies earlier this week. We think the focus will be primarily on US continuing claims this morning which will be followed by what is expected to be soft US heavy industry/manufacturing data. Fortunately for the bull camp, the gold market did not have significant debt ceiling flight to quality premium in prices as the situation has been temporarily pushed down the road with another CR. However, the previous Moody’s credit outlook for the US included concerns for the inability to govern and address the surging deficit and the continuing resolution allows for further debt to accumulate into the end of January. Silver should continue to outperform gold with its physical demand prospects improved by this week’s economic optimism.
COPPER
We are a little surprised with the copper market’s higher high in the early going today, as Chinese house prices dipped overnight, a risk off global mentality has returned and volume and open interest continue to decline on this week’s rally. Unfortunately for the bull camp expectations for today’s US heavy industry/manufacturing data favors the bear camp with US continuing claims likely setting the early tone for physical commodities. KGHM, Europe’s second largest copper producer, announced a deal to extend its supply agreements to the Chinese with a possible further 600,000 tonnes of copper to be delivered between 2024 and 2028. This news comes out just as Trafigura released its estimates of a very large shortfall in copper concentrate supplies by 2025.
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