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Markets Embrace Flight to Quality Buying


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.

various metal bars


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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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.

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