Written Commentary
COPPER
While the copper market was reportedly under pressure yesterday because of growing doubt of a first-half US rate cut, and by a higher high in the dollar the March contract appears to have found value around the $3.70 level. Fortunately for the bull camp, daily LME copper warehouse stock readings continue to decline filling the void of information left by the Chinese holiday. With the Chinese on holiday, this week we expected sluggish to sideways action but would not be surprised today if a hard break in copper prices in the coming 24 hours prompts vacationing Chinese institutional buyers to act. Unfortunately for the bull camp, the Chinese government appears to be more focused on Taiwan than on its struggling economy and therefore we leave the edge with the bear camp today.
GOLD / SILVER
While April gold is tracking in positive territory early today and has established a key pivot point around $2005, the onus is on the bull camp to prove the market can respect even number consolidation support at $2000. Unfortunately for the bull camp, gold ETF holdings continue to slide with year-to-date outflows of 2.8% taking place in less than 50 days. While Indian gold imports in January increased to $1.9 billion that is probably a function of the recovery in gold prices and not necessarily from increased volume. Furthermore, the market remains disappointed in the recent hawkish tilt from the Fed which is more effectively described as disappointment in the lack of dovish indications from the Fed, with market expectations for the first US rate cut shifting into the second half of this year. Fortunately for the bull camp the dollar has been unable to benefit from soft economic data from Europe and the UK overnight, but a very active slate of US data this morning will likely result in significant dollar volatility especially given the massive rally earlier in the week. Obviously, initial claims will be the highlight of the trading session followed closely by US retail sales, but expectations for the data today call for insignificant changes but therefore a minor improvement in US retail sales could still further the delay in cutting rates which could result in the dollar surging to higher highs and April gold failing.
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