Written Commentary
GOLD / SILVER
While the gold and silver markets are trading in positive territory early today, outside market forces are mixed to slightly bearish early on with US treasury yields drifting toward an upside breakout following a very poor five-year US treasury note auction yesterday. However, gold should be supported from news of additional Chinese stimulus with an expansion of uses for commercial property loans which follows a reduction in the Chinese bank reserve ratio requirements earlier this week which followed $258 billion support package for Chinese equities last week. Gold should also see support from Chinese gold imports to the mainland China from Hong Kong. Unfortunately for the bull camp, gold ETF holdings fell again by a significant amount with total gold ETF holdings already down 1.5% year to date. It should be noted that today will bring an extremely active US scheduled report wave with broad-based GDP, critical durable goods and inflation readings all released in the early trade. Another critical development at mid-session will be the culmination of this week’s US treasury auction cycle with the sale of seven-year notes. While the March silver contract has not taken out yesterday’s high in the early going, the charts favor the bull camp with the market seemingly lifted this week by improving global economic sentiment and a slight improvement in views toward physical commodities.
COPPER
Not surprisingly, the copper market is tracking higher with a higher high for the move following another Chinese stimulus program. The latest Chinese support for their economy allowed commercial property loans to be used for a wider array of projects which should provide extra relief for the beleaguered Chinese real estate sector. It should be noted that today’s Chinese stimulus follows two other stimulus packages over the last week. With sentiment toward China shifting 180 degrees following the reduction in their bank reserve requirement ratio, the outlook for Chinese copper demand has also improved. The improved Chinese copper demand potential is magnified by the improvement in economic sentiment in the US. Yet another development bolstering an improvement in global copper demand prospects are upbeat Chinese and US copper demand forecasts from the Freeport Mac Moran CEO.
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