Written Commentary
GOLD & SILVER
Despite a building overbought condition in gold and silver, prices continue to extend on the upside this morning in what we consider long-term fundamental based investment trading. Evidence of the bulls piling on the trade were seen overnight from Commerzbank overnight predicting gold to reach $2150 in the second half of next year and silver reaching $30 per ounce by the end of next year. In a sign of a developing overbought condition, gold ETF holdings yesterday saw an inflow of 121,463 ounces which is a 0.1% single day addition to total holdings. While we see upside momentum extending into next week, expectations for central bank rate cuts are mostly projected beyond the first quarter next year and at some point, soon the rate cut rally should exhaust. However, gold and silver showed bullish resiliency yesterday in the wake of positive US scheduled data that could have tempered the newfound dovish central bank views in the marketplace. Nonetheless, treasury rates continued to fall, and the dollar remains vulnerable, and that should provide ongoing outside market spillover buying for gold and silver.
COPPER
While the copper market does not typically see non-Chinese demand developments as a major force, the breath of this week’s global economic paradigm shift toward dovishness and ongoing gains in global equity markets has overshadowed a significant rise in weekly Shanghai copper warehouse stocks of 4,054 tons overnight. Apparently, the markets are not overly concerned about the build in Shanghai copper stocks event though those stocks have built by 16% and 13.4% over the last two weeks. However, disappointment toward the Chinese economy was tempered overnight a favorable Chinese industrial production reading for November and by a month over month rise in retail sales. In a longer-term bullish overnight development, Commerzbank expects further significant upside in copper prices from a combination of tight supply and recovering demand.
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