Written Commentary
COPPER
Clearly, big picture macroeconomic sentiment continues to inspire copper buying with the overnight high reaching the highest level since early August and yesterday’s recovery resulting in a significant jump in trading volume. Apparently, the lack of a rate cut from the Peoples Bank of China overnight was ignored by the trade with March copper falling $0.045 from the overnight high which means the technical condition probably puts some buyers back on their heels. Unfortunately for the bull camp LME copper warehouse stocks have now declined in 14 of the past 22 sessions and Reuters overnight has reported the Chinese continue to restock.
GOLD & SILVER
With some global inflation readings plummeting overnight and others coming in below expectations, the prospect of rate cuts next year has improved again. In fact, the CME Fed watch tool raised prospects of a January 31st cut by 4% to 12.4% and increased its March rate cut prospect to 71%. However, despite renewed rate cut chatter and a downward bias in the dollar both gold and silver are trading lower signaling a lack of bullish sensitivity today. Therefore, it is possible that a soft US existing home sales report could increase rate cut hopes further without lifting gold and silver. Investment interest in gold and silver favors the bull camp in silver, with very large silver ETF inflows this week and gold ETF holdings overnight posting a very large single day decline of 0.3% of total ETF holdings of 85.5 million ounces. Pushed into the market today we give a slight edge to the bull camp in silver over gold with increased investment interest, improving prospects for global physical demand improvement and a relatively less overbought COT positioning.
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