Written Commentary
GOLD / SILVER
While the CME Fed watch tool pegs the probability of rate cuts in the January, March, and May Fed meetings at 2.6%, 48.1%, and 50.1% respectively, we feel there is a slightly higher whisper expectation for a rate cut in market. However, with the Feds favored inflation measure (PCE) scheduled for release today and expectations calling for a +0.2%, the prospect of a near-term cut in US rates should remain very small. In fact, to see a rate cut by the June meeting will likely require some contractionary monthly PCE readings. With a minimal initial upside pulse in the dollar early today offset by generally lower US treasury yields, the bull camp should have a measure of outside market support. Nonetheless, a 0.1% or softer reading could ignite gold on the upside especially after this week’s high to low slide of $35. Unfortunately for the bull camp the net spec and fund long in gold probably remains burdensome and signs of increased gold demand from mainland China earlier this week was not embraced by the trade. Unfortunately, precious metals investment demand remains soft with gold ETF holdings falling 84,964 ounces and are already 1.6% lower year-to-date. While the silver market has not posted a higher high early today, the market sits near a higher high but will need a soft PCE and a decline in the dollar after the 730 US report window to leave the bull camp in control.
COPPER
With a bad technical trade overnight, a weekly increase in Shanghai copper warehouse stocks (the third in a row) and reports of slightly lower Chinese social inventories (off exchange inventories in key copper using areas) the outlook today is mixed with a slight edge to the bear camp. In a fresh positive development, the Chinese copper smelter sector has called for lower copper concentrate output as Chinese copper smelters overnight indicated there is tightness in raw copper ore inside the country. However, with copper prices into the high yesterday sitting nearly $0.18 above the January low, the copper market has factored in a large measure of hope for improvement in China and has likely become short-term technically overbought. On the other hand, Citigroup upgraded their three-month copper price target reportedly because of views of a tightening copper concentrate market.
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.
