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Silver Holds Sector Leadership


Global equity markets overnight were mixed with markets in Asia and the Pacific rim lower and generally higher in the West. With the dollar overnight breaking out to the highest level since May 14th, US treasury yields nearing the highest levels of the month and critical US inflation data from the quarterly PCE report to be released later this morning, traders should expect an expansion of volatility in gold. Divergence between gold and silver extended yesterday with silver remaining strong, gold showing weak and silver adding to its recent show of sector leadership.


The net spec and fund long in copper was extreme into the May high and month end position squaring and stop loss selling looks to control again today. On the other hand, structural bullishness from tightening global supply and steadily improving demand should produce a solid value zone soon especially with Goldman Sachs overnight predicting copper to resume its sharp rally once finite supplies of cheaper substitutes are exhausted which should add an additional 15% to recent high prices. On the one hand, interest in global mining capacity highlights expectations of ongoing severe tightness of copper supplies but may have signaled a temporary overvaluation of Anglo-American shares. Macroeconomic influences are shifting bearish and may remain so today with a strengthening dollar, a spike up in global interest rates, and an ongoing risk off environment flowing from equities.

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