Written Commentary
GOLD & SILVER
The bulls started the New Year in control as gold prices rallied in the early morning after Israel attacked Syria in response to a rocket attack, and Turkey arrested 33 Israeli “spies”. There is fear that this might be the start of a deeper regional destabilization following the US Navy’s sinking of three Houthi ships in the Red Sea, and Iran sending a warship into the Red Sea. US interest rates were higher overnight and the dollar managed to rally sharply to start the year. The bulls shook off these macro headwinds as there is much euphoria around gold to start the year, and there are plenty of bulls lined up to buy.
COPPER
Copper started the first trading session of the year under noted pressure as a slight improvement in Chinese PMI data was discounted. Although there has been speculation of further Chinese stimulus, this has yet to show up even as Xi gave his speech this morning outlining China’s economic woes. In a more direct bearish development last week Chinese Shanghai copper warehouse stocks increased by 2187 tons insinuating soft Chinese domestic demand. Several of the European PMIs came in above estimates overnight but they are all still well below 50, and the trade chatter suggests the euro zone may already be in a recession. As in the gold market, the copper market should see some pressure from higher treasury yields and an upside extension in the US dollar. The bulls still see a glimmer of hope as Chilean copper output dropped 3.1% from a year earlier. Chile is the largest copper producer in the world, but it has been hurt by lower quality ores and slower than expected expansions.
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