Written Commentary
GOLD & SILVER
The overnight action is a good example of how the gold and silver trade is tracking its own course, as interest rates, currency, bitcoin, and energy prices are not giving off notable influences and yet gold and silver prices have surged again with gold posting another new all-time high. Therefore, it is unlikely gold is tracking a classic safe harbor issue with a broad global origin. In a slightly negative signal both gold and silver ETF holdings declined yesterday, with the gold extraction of 299,047 ounces the largest single day exodus in three months. It seems that some small investors have been enticed to bank profits. In another positive, the market has summarily discounted the Central Bank of Kazakhstan news that it will resume its sales of gold as it attempts to keep gold as a percentage of total reserves in a range bound by 50% and 55%. Surprisingly, the gold market has also maintained its bullish track despite modest headwinds from the dollar and US treasury yields yesterday. In retrospect, buyers today seem to indicate news of ongoing Chinese central bank gold buying has attracted their interest while other traders see ongoing Bitcoin gains and Middle East tensions as a reason to buy dips. However, given this morning’s new all-time high, the net spec and fund long in gold is likely the largest since April 2022 leaving gold and silver vulnerable to a sudden spike in volatility. Later today, gold and silver volatility could be restrained as financial markets avoid implementing fresh positions ahead of a major US inflation reading on Wednesday (CPI).
COPPER
The copper market remains pinned to the spike up highs yesterday from a market theme anticipating a tightening of global copper supply. Not surprisingly, the Shanghai copper contract has hit an all-time high overnight even though supplies at the Chinese exchange are at nearly 300,000 tons. Underpinning the bull case are fresh upward revisions in price targeting from several brokerage research departments overnight and the reduced copper smelting capacity in China. However, the trade has apparently discounted a higher-than-expected Chinese refined copper output tally for last month, with that output rising by 5.2% versus the prior month. On the other hand, the trade expects refined copper output in China to decline by a minimal 0.2% this month. While the situation in China is obviously the tip of the bull’s sword, the trade is apparently fixed on the idea that Central and South American copper production will remain off pace. Apparently, the upside breakout has also triggered fund buying but given the rally since the last positioning report it is possible that the net spec and fund long in copper is now at the highest level since April 2021.
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