Written Commentary
COPPER
Despite weakness in Chinese equities overnight, a measure of disappointment over the breath of Chinese government housing project support, and the threat of a US/China trade war, copper prices have extended the breakneck rally of the prior five trading sessions with a five-day low to high rally of $0.34. In fact, bullish sentiment appears so strong that despite spec and fund long positioning in futures and futures options positions nearing record levels, the market does not appear to lack additional buying capacity. Apparently, Asian copper traders have shown some hesitancy to “pay up” and despite what is typically a seasonal upswing in consumption, many buyers are noting softer than expected physical demand.
GOLD & SILVER
While international inflation measures might not actually correlate with inflation in the US, the markets overnight were presented with an avalanche of inflation readings registering a range of results from steady inflation to red hot inflation. In fact, beyond the standard scheduled inflation reports, the markets also saw Japanese and Indian April wholesale price index readings jump at the fastest pace in over a year. However, many central bankers and economists see inflation coming under control throughout the world which in turn makes today’s US PPI and tomorrow’s US CPI a very critical junction for global inflationary expectations. While we suspect the ebb and flow of central bank monetary policy expectations, currency fluctuations and interest rate fluctuations will ultimately dominate the direction of gold and silver, in the near-term prices might only see a small measure of classic fundamental support from another decline in South African gold output which adds to a very long pre-existing pattern of declining production. South African February gold output was revised to 5% lower with March output reported to have declined by 4.5%. However, the ebb and flow of global central bank purchases, fluctuations in speculative trading and changes in retail demand leave production as a hindsight influence. From a technical perspective, the gold and silver charts favor the bear camp with trading volume on the May recovery bounce notably lower than trading volume seen in the big March and April rallies. However, the fundamental impact on gold and silver could temporarily dominate action today with the bull camp badly needing the potential for the US Fed to cut rates to become a fixture again in the trade.
Interested in more futures markets? Explore our Market Dashboards here.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
