Written Commentary
GOLD & SILVER
The big question for the gold trade now is will the tensions between Israel and Iran cool and temporarily end the potential for sudden massive geopolitical inspired flight to quality buying. While not a major bearish development, gold and silver ETF holdings continue to decline with the declines in gold and silver ETF holdings very significant yesterday. Even the technical picture has shifted in favor of the bear camp with the overnight spike up move squarely rejected. In fact, this morning early gold prices are trading $36 below the overnight high, with July silver prices trading $0.77 below the overnight high. Yet another bearish development, the Vietnamese central bank announced they would auction gold for the first time since 2013. In retrospect, gold has recently delinked correlations with treasury yields and the dollar but given the drop sharp in US treasury yields this week (bonds gained almost 3 full points) at least part of the consistently bearish outside market influences have dissipated in favor of the bull camp. In a fresh negative unlikely to impact gold prices significantly, Swiss March gold exports declined because of lower India and Turkish purchases which outweighed higher sales totals to mainland China and Hong Kong. The Swiss clearinghouse is the largest clearing center in the world and handles significant volumes of another precious metals as well. Apparently, gold demand in China has remained robust because of fear of holding Chinese currency.
COPPER
While a minimal inflow to Shanghai copper warehouse stocks this week would not appear to be a major bullish development, the minimal inflow to weekly inventories tempers what has been very consistent massive weekly inflows to Chinese exchange warehouses. However, global traders continue to focus on long-term tightening of global refined copper supply with the tight supply theme given a psychological lift by overnight news indicating the Chilean government has cooled on plans to build a new copper smelter and instead plans to overhaul a current facility reportedly to reduce the country’s reliance on Asian smelters. Another bullish issue facilitating this week’s gains is another bullish price forecast from Citi predictions the copper rally will continue for the next three months. The bullish outlook for copper was also facilitated by a Chinese government supported research group who cited strong Chinese demand as the main catalyst of a continued bull track in copper prices.
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