Written Commentary
GOLD & SILVER
With an overnight explosion in prices, gold reached a new all-time high while silver posted explosive gains and the highest price since February 2013. With the battle heating up in Gaza, a slight shift in the US Fed policy pendulum in favor of the doves last week, and a strong close last week on rising open interest should leave gold in a position to forge even higher all-time highs. However, the silver market could become the sleeper market as a cheap gold substitute especially with a surprise upside extension overnight and given silver is significantly cheaper than gold, and with silver still well below all-time high levels above $50 from decades ago. Certainly, both gold and silver are seeing their net spec and fund long positioning expand rapidly. However, recent COT positioning in gold was only at two-year highs.
COPPER
Despite some wild two-sided trade last week that gave off the impression of a blowoff top, the July copper contract recovered and closed just under the contract high of $5.1280 setting the table for this morning’s new record high. Clearly, the trade is fully embracing long term structural tightness fear, with users, speculators, fund managers and perhaps the Chinese government all scrambling to secure supply. However, despite the explosion in prices, LME and Shanghai copper warehouse stocks have not plummeted indicating a race for deliverable supply. On the other hand, last week LME copper was reportedly beginning to flow to the CME indicative of some arbitrage. However, until the high prices start pulling in significant copper, the bull camp should control.
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