Written Commentary
GOLD & SILVER
Despite a chorus of hawkish global central bank dialogue flowing from the IMF meeting, gold and silver prices are tracking higher perhaps because of slightly supportive outside market action in US treasuries and the dollar. However, a new concern may be rising in the marketplace as significant declines in Japanese and South Korean currencies were acknowledged by the US Treasury Secretary at the IMF meeting with the US, Japan and South Korean officials agreeing on the need to monitor and consult with other central banks on the situation. Not surprisingly, the IMF dialogue has resulted in a downside extension in the US dollar this morning which could be the primary source of the gold and silver rebounds. However, checking the upside action in gold is the latest wave of US Fed commentary which in turn pushed back the timing of and reduces the potential number of US rate cuts this year. The gold and silver markets were deserving of a setback from severely overbought technical conditions, but the pattern of higher lows has not been disrupted this week. On the other hand, bitcoin futures posted a massive range down failure yesterday and reached the lowest levels since the end of February in a fashion that detracts from the gold bull case.
COPPER
With major brokerage firm research departments predicting an extreme global refined copper deficit this year and reports of concentrated hedge fund stop loss buying, copper prices have vaulted even higher which certainly exaggerates what was already a significant overbought condition. Adding into the speculation of ongoing tightness in copper are concerns that sanctions on Russia will impact their exports of copper, aluminum, and nickel. A large portion of overnight gains is likely a reaction to the 3% rally in Shanghai copper overnight. It should be noted that the US and China are engaging in a trade rift over base metals trade and that adds the potential for increased copper price volatility. Certainly, the reduction in Chinese smelting capacity has given the bull camp a distraction from classic Chinese demand signals, but massive inflows to Shanghai copper warehouse stocks and a massive net spec and fund long suggests the current rally is excessive.
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