GOLD / SILVER
We see the action in gold and silver this morning as very discouraging and defeating for the bull camp, especially in gold given the sharp range down extension US dollar. In fact, with the Indian government pegging October gold imports jumped by 60% over year ago levels, a surging bear case in the dollar and expectations the FOMC meeting minutes will again confirm the US rate hike cycle is done, the gold market should be up $11 instead of down $11. In addition to the strong jump in Indian gold imports, the Reserve Bank of India added 9 tons of gold in the third quarter which should revitalize hopes of ongoing global central bank gold purchases. Unfortunately for the bull camp China held interest rates steady overnight and German producer prices contracted which erodes hope for improved physical gold demand from Germany. Granted, the gold and silver trade might be undermined by the slight uptick in implied US treasury yields this morning but that is hardly justification for the type of early slide in gold prices.
Copper prices continue to power ahead this morning as the dollar weakens to its lowest level in almost three months. However, there have been a lot of gloomy stories coming out of China this morning with worsening housing outlooks and worries over ING bank getting caught up in the bankruptcy of China’s largest copper trader. Furthermore, copper has managed to rise morning despite the Peoples Bank of China leaving interest rates unchanged despite their beleaguered real estate driven economy. In the end, Copper continues to rise despite all this bad news suggesting the trade at its core is relieved with the end of the historic global rate hike cycle. The charts in copper also favor the bull camp with higher lows and higher highs unfolding since the mid-November spike down reversal. Fortunately for the bull camp, the latest positioning report showed the speculative trade remained short, indicating more stop loss buying potential in the near term.
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