Written Commentary
GOLD & SILVER
While the net spec and fund long in gold suggest the market is heavily overbought, we suspect technical signals will take a backseat to classic flight to quality headline news flow. However, with the post COT report rally, the net spec and fund long in gold is likely the longest in two years, and therefore any sign of a cease-fire between Israel and Hamas could result in a massive correction. In our opinion, the cease-fire talks in Cairo will be the linchpin of this week’s trend. It goes without saying that the silver market will continue to follow gold price action which we think will remain mostly centered on flight to quality action and not on the dollar, inflation, or interest rates. With the silver market gaining $0.39 into the high Friday, the net spec and fund long in silver may have reached the highest level since the early days of the Covid breakout. Like gold, the silver market is vulnerable to significant downside.
COPPER
Apparently, seeing a decline in Chinese industrial profits in March had little if any impact on copper prices overnight as the July contract managed another higher high for the move and in turn reached the highest level since April 18th. However, Chinese and Hong Kong equities managed gains and Chinese property shares rose off hope of stimulus from the Peoples Bank of China. With a very strong close last Friday, it is not surprising that the net spec and fund long positioning in copper is likely at the highest level since February 2021. Obviously, the copper market has been ignited by fresh demand hopes following a significant decline in Shanghai copper warehouse stocks last week of 4.2% and by improved demand expectations given a return to risk on sentiment in global equity markets.
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