GOLD / SILVER
Not surprisingly, the gold market started off under noted pressure today with a six day low largely because of the upside breakout in the dollar to the highest level since mid-November and from a slight increase in US treasury yields following a hawkish overnight speech from the US Fed chairman. With the gold market adding to the January recovery rally last week before failing and reversing, the market was giving off technical signs of an intermediate top last week. Unfortunately for the bull camp, outside market impacts of the dollar and treasuries shifted patently bearishly after the much stronger than expected US nonfarm payroll reading. Given the ramping up of US and UK attacks on targets in Yemen, the gold market should have found some flight to quality support down around the $2,023 level. In fact, on Friday the NYSE announced an order imbalance on the buy side for Barrick Gold, but eventually shares closed lower. Furthermore, investor interest in gold continues to soften in the ETF markets with gold holdings falling for 12 straight days as of Friday. Furthermore, fresh buyers in from the upper half of Friday’s range are under pressure, especially with the gold market failing to hold Friday’s low at $2,044.20 early today. While the net spec and fund long positioning in gold decreased last week, gold at the start of this week was above where the report was measured, which was 74,000 contracts longer than on October 3rd. In conclusion, the gold market is “overbought and vulnerable” to “stop-loss selling.” While we thought the silver market was tracking physical demand fundamentals last week, the much better-than-expected US jobs report and ongoing gains in equities has not cushioned the market, thereby leaving the potential for a retest of $22.00 in place. In another sign of bearishness toward silver as an investment, silver ETF holdings last week lost 8.3 million ounces of holdings.
With the Shanghai stock exchange composite closing 1% lower overnight and continuing its recent plunge, concerns of softening Chinese copper demand are front and center and on the back of the copper market this morning. Even though the copper market managed to rally in the first three days of last week’s trade and managed that in the face of persistent expansion of fear toward the Chinese economy, the market reversed and closed very poor on the charts suggesting a trade back below $3.80 is in the offing. Adding into the negative Chinese copper demand theme is the largest weekly increase in Shanghai copper stocks last week since February 2023 which left the total inventories at the highest level since July 2023. Yet another bearish takeaway from the Shanghai copper inventory report is the fact that inventories have declined for five straight weeks. However, fortunately for the bull camp, the copper market is already net spec and fund short which could moderate the amount of stop loss selling. Yet another bearish Chinese development for copper overnight was a softer than expected Chinese Caixin services PMI reading for January.
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