Written Commentary
GOLD & SILVER
While the gold and silver markets are showing positive action early today, both markets look to face a small measure of outside market pressure from a tick higher in US treasury yields and a higher high versus Thursday in the US dollar. While the gold and silver trade were lifted off the recent low by a glimmer of hope for a US rate cut earlier this year, impact from the Fed yesterday shifted slightly negative with at least two members indicating borrowing costs need to stay higher for longer. Even though overnight Chinese economic data (particularly retail sales came in softer than expected and house prices fell more than expected), the outlook for the Chinese economy and therefore for precious metals and commodities was saved by a very unusual and direct Chinese government support for the Chinese housing market. However, in a potential negative or drag on gold prices today reports from the Indian gold market suggest high prices are discouraging some purchases. However, the charts in gold and silver remain bullish with the trade posting higher highs yesterday and both markets approaching the 2024 highs. It should be noted that bullish chatter toward silver is on the rise and given silver’s capacity to diverge positively with gold yesterday and given the low gold/silver ratio silver could be poised to forge a three year high.
COPPER
While the copper market might be a bit exhausted from the massive May rally of $0.68 and from the extensive volatility over the prior seven trading sessions, a bullish bias remains in place. However, the market could have been undermined by a much larger than expected decline in a Chinese house price index and from softer than expected Chinese retail sales. Fortunately for the bull camp, the Chinese government has launched a unique and perhaps powerful stimulus for the economy with local governments granted the power to buy apartments, and the PBOC reducing mortgage rates, lowering downpayments and establishing a fresh lending loan facility financed by 300 billion yuan. While not always the case, increased futures margins can prompt profit-taking and other liquidation from traders unwilling to “put up more margin money.”
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