Written Commentary
PRECIOUS METALS
Gold and Silver
With a measure of divergence (gold holding up better than silver) we see a lack of definitive bullish sentiment toward precious metal markets. It should be noted that the sharp rally in gold last week was reportedly the result of a “flight to quality” event which has been a rare occasion in gold for several years. In our opinion, the significant recovery in December gold last Thursday was based on suspicious fundamental reasoning with the trade interpreting comments from the US Federal Reserve Chairman as a signal the Fed would not hike rates this month.
With gold and silver not showing sustained flight to quality interest beyond last Thursday’s event, gold prices basically tracking sideways over the last four weeks and open interest falling off slightly it does not appear as if a buying wave is poised to enter the market.
BASE METALS
Copper:
The copper trade should be somewhat disappointed in this morning’s minimal gains following a generally positive series of favorable Chinese economic reports released overnight. In fact, Chinese GDP ticked higher, industrial production came in stronger-than-expected and retail sales nearly doubled the gains posted in the prior month. However, the copper trade has started to consider US tariffs may not be implemented and that in turn has prompted many traders to ponder just how large of a break could prices forge if tariffs are put on the shelf. Given significant geopolitical turmoil and supply side issues over the last year, it is difficult to determine what the “tariff premium” is in copper prices.
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