Written Commentary
GOLD & SILVER
With a new low for the move in the dollar early today and slightly weaker treasury rates, gold and silver bulls look to extend their recent control. In addition to the constant lift from the fully entrenched expectation of lower global rates gold and silver are likely benefiting from favorable Chinese industrial profit results as China remains the number one consumer of gold. Apparently, the Chinese central bank has predicted China will achieve its 5% growth target next year and that combined with signs of continued cash infusions from the Bank of India provides a very solid demand base. In an additional supportive development for gold, the reserve Bank of India indicated their current account gap narrowed in the most recent quarter, with Indian gold imports, policies and duties heavily impacted when the Indian current account deficit reaches concerning levels. However, we do not expect physical demand headlines involving India and China to inspire noted gains in gold and silver prices directly ahead, but the prospect of better demand from the top two consuming nations should help underpin gold and silver prices. It should be noted that there will be a 5-year US treasury note auction today at midsession and strong demand is anticipated which in turn could result in lower US yields, a weaker US dollar and therefore more gains in gold and silver. Unfortunately for the bull camp, adjusting for the gains since the last COT report was measured, the gold net spec and fund long positioning is likely near the highest level of 2023. With March silver definitively diverging with gold in the early trade, the silver trade has differentiated itself from both industrial and financial commodity markets today.
COPPER
With Chinese corporate profits registering favorable results overnight, LME copper warehouse stocks continuing to decline and generally favorable sentiment flowing from global equity market gains overnight the bull camp should have managed an upside breakout today. However, despite favorable internal and external conditions this morning we think March copper will continue to lose traction on trades. In a longer-term bearish development, the world’s largest copper producing country (Chile) expects mining investment reach $65.7 billion in the next eight years, with a Japanese company indicating it would invest $4.4 billion in the expansion of a copper project in Chile. Unfortunately for the bear camp, the net spec and fund positioning in copper has only recently shifted from net short to net long, which should leave the market with speculative buying capacity.
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