Written Commentary
GOLD / SILVER
While the recovery in the dollar is not significant this morning, and the slide in treasuries has not resulted in higher highs in treasury yields, outside forces have clearly shifted back in favor of the bear camp. Apparently, China released its manufacturing PMI readings for September overnight which countervailed recent signs of green shoots and a measure of optimism that was associated with the upcoming extended holiday. Once again, the US Congress “kicked the debt problem down the road” with a continuing resolution pushing the threat into mid-November. With the gold market last week posting a high to low slide of $84, the fear of a US government shutdown resulted in the market returning to a classic physical commodity market personality. Therefore, both gold and silver look to remain hostage to the action in the dollar and US treasuries. Certainly, the US dollar came under significant liquidation pressure following last Wednesday’s spike high, but the dollar has rebounded aggressively from its low Friday with a recovery of nearly 70 points which could indicate it retains a bullish posture. With last week soft interpretation US inflation readings, treasury yields near two-decade highs, the Chinese on holiday, and investors continuing to flee from ETF instruments, the path of least resistance remains down.
COPPER
Despite the Chinese economy on an extended holiday, negative headlines continue to flow the world’s largest copper consuming nation. In fact, a softer than expected Caixin manufacturing PMI reading counters a recent emerging pattern of more upbeat Chinese economic headlines. Furthermore, according to Bloomberg Chinese investors think the worst of the property sector woes are yet to pass. Fortunately for the bull camp the copper market has held a moderately significant net spec and fund short recently and that could mitigate the magnitude of fresh selling. Fortunately for the bull camp, Shanghai copper warehouse stocks fell sharply last week and the prospect of a strike in Chile could provide a threat against supply to countervail lingering international copper demand suspicions.
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