Written Commentary
GOLD & SILVER
While we don’t expect to see a significant gold and silver price reactions to today’s US jobs related data, a higher high in the dollar early on, slightly higher US interest rates and a series of lower highs and lower lows in gold this week leaves the bear camp with an edge. On the other hand, the trade is expecting a slight increase in continuing and initial jobless claims and that could provide a brief lift for prices. However, favorable Chinese trade data and a report of an improvement in the Chinese homebuyer market should provide an improvement in expectations for improved Chinese gold demand. Even though the markets will be presented with a Bank of England rate decision early today, that news is unlikely to have a major impact as the trade thinks the policymakers will simply favor lower rates in dialogue and not act. At present, without a surprise headline development, we leave the edge with the bear camp with trading ranges expected to be narrow and the expectation the lower high and lower low pattern to extend. Going forward, the dollar bulls look to extend their control which should thicken resistance in gold and silver.
COPPER
While the copper trade maintains a bullish tilt from long-term structural tightness projected from industry experts, the lack of a positive reaction to improved Chinese import and export data overnight suggests the bias remains down. However, with Chinese April copper imports dropping from price shock, a slide below $4.50 in July copper is likely in the coming 36 hours of trade. Fortunately for the bull camp, Chinese January through April copper concentrate, unwrought copper and copper product imports increased year-over-year potentially discounting the April import drop as a temporary response to prices surging by more than $0.60 in the month and given copper prices at one point were $1.00 above the February low. In fact, given what could be a massively overdone net spec and fund long positioning report tomorrow afternoon, we suspect the copper market will continue to grind lower. However, LME copper warehouse stocks continued to fall with consistency but that has not been in the headlines yet. On the other hand, the cash to three-month LME copper spread reached the largest discount ever yesterday, suggesting bullish sentiment might have been overdone as of late last month.
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