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Ongoing Fundamental Cushion in Gold


Contrasted with historic inflation/gold prices patterns, further evidence of “sharply falling” global inflation provides gold and silver with ongoing fundamental cushion. In other words, “significant” declines in UK, euro zone, and Italian inflation (Italian year-over-year producer prices declined by a startling 12.6%) directly or indirectly provides the US Fed with evidence that US inflation is also poised to fall. While the CME Fed funds watch tool has not registered a significant increase in the probability of a March US rate cut this week, it is possible that reality is catching up with what the Feds Goolsbee earlier this week indicated was market expectations for cuts running ahead of the Fed’s internal dialogue.

gold and silver bars on black background


Copper prices took a breather overnight after hitting a 5-month high yesterday. Helping the bears were Chinese reports overnight that cited higher prices as a reason for softer demand for copper. Furthermore, Eastern Chinese producers have reported a buildup in finished goods, which has led to slower than expected new orders. However, LME copper warehouse stocks continue to decline and Polish copper producer KGHM indicated its November copper sales to have increased 6% but that was offset by a 2% increase in November production. Unfortunately for the bull camp, seemingly bullish economic data (soft), hasn’t been beneficial from the theme of lower rates next year and softer US data has not resulted in a lower dollar.


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