Written Commentary
GOLD & SILVER
With gold and silver prices significantly higher overnight in the face of a very significant upward thrust in the US dollar it is possible the markets are beginning to aggressively embrace flight to quality buying from rising economic concern toward China. In fact, overnight Chinese import, and export readings came in significantly below expectations which facilitates more anxiety toward an economy thought to have serious problems. It is also likely that rising concerns of financial pressures on developing countries is fostering flight to quality buying of gold and silver in anticipation of a financial crisis in the emerging market sector. In addition to the potential for economic uncertainty arising from a meltdown in the Chinese economy, fear of an Iranian strike against Israel has risk instruments like gold, silver, Bitcoin, oil prices and the dollar surging. While the trade has not embraced the very long pattern of declining South African gold production, South African February gold output reportedly declined by 3.6% versus year ago levels and that provides a somewhat rare supportive supply side theme. With the aggressive range up extension into even higher all-time high territory, gold (and silver) apparently balanced their overbought technical condition with the temporary corrections earlier this week.
COPPER
With a higher high and the highest trade in 12 months, the copper trade is clearly unconcerned about signs of precipitous slowing in the Chinese economy following softer than expected Chinese imports and exports. However, Chinese January through March unwrought copper imports surged 6.9%, while copper concentrates and ore imports increased by 5.1% and that has clearly offset ongoing and escalating concerns toward the Chinese economy. Weekly Shanghai copper warehouse stocks have now increased in 15 of the last 16 weeks and have reached nearly four year highs. However, the constant refrain of disrupted global copper production and reduced smelter capacity in China continues to dominate market sentiment.
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