Written Commentary
GOLD / SILVER
While gold has recovered from yesterday’s spike down move and has spent the overnight trade in positive territory, the charts have not reversed course and we suspect more declines ahead which in turn should pull down open interest. While gold has seen outside market influence wain, treasury prices appear to be trending negative for gold, and we see the general impact from outside markets as bearish in the near term. Certainly, the Fed’s Bowman overnight displayed a softening of her hawkish posture but that was more than offset by comments from the Fed’s Bostic who indicated he does not see a rate cut until the third quarter of this year. However, the ebb and flow of expectations for US Fed policy will see critical input tomorrow from US CPI which is expected to post a gain of 0.2% versus 0.1% gain last month. While an “as expected” CPI will present a historically insignificant increase from the prior month, the trade continues to obsess over the prospects of a rate cut and therefore we see CPI as a very minimal negative for gold and silver. In an additional bearish development gold ETF holdings fell for the fifth straight session yesterday with a rather large single day outflow of 172,303 ounces which puts year to date holdings down 0.6% in just several trading sessions. Unfortunately for the bull camp, the market lacks a definitively bullish internal fundamental case and therefore gold is likely to remain hostage to daily movements in the dollar and treasuries.
COPPER
With the rejection of a new low for the move and higher close yesterday erased by weakness early this morning, the January low at $3.7995 becomes a key pivot/failure point on the charts today. Fortunately for the bull camp daily LME copper warehouse stocks continue to grind lower and the market saw an 8.3% rise in Chinese car sales last month. However, the LME copper cash/3 month spread discount has expanded to the highest level since 1992 (according to Reuters) which highlights soft near-term demand and could mean lower prices ahead. While the market could see support from news of a decline in Chilean December copper exports, that reading failed to impact the market with its initial release yesterday. However, the next critical Chinese economic data is new loans scheduled for release tonight US time, and with expectations calling for a significant improvement in that measure, a spike down move in US copper today could prompt bargain hunting buying tomorrow. However, the copper trade and other markets with strong Chinese demand have been unwilling to improve their outlook for Chinese copper demand, and therefore it could take a very significant jump in new loan data and improvement in Chinese exports on Thursday to fully reverse the downward track on the copper charts.
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