Written Commentary
GOLD & SILVER
With oil prices not signaling an imminent cease-fire deal (given initial gains), sharp declines in gold and silver without correlation to outside market influences, suggest the precious metal trade is concerned about a pause in hostilities. However, the bull camp is buoyed by the potential for a third straight monthly gain in gold prices and by talk of strong global gold demand. According to the World Gold Council’s first quarter Gold Demands Trends report, total global demand increased by 3% versus 2023 and posted the strongest first quarter since 2016. It should be noted that instead of detracting from global demand readings, OTC purchases of gold were responsible for the increased total demand reading. Without the OTC purchases in the first quarter gold demand fell 5%. Not surprisingly, gold ETF holdings continued to decline with an outflow of 114 tons. Fortunately for the bull camp central banks continued to add to reserves with purchases of 290 tons in the first quarter. While it is a little premature to think the selloff this morning is attributable to the Wednesday afternoon FOMC meeting, given month end today it is possible that some longs are banking profits to stand aside from the impact of the Fed and in turn window dress monthly returns. Obviously, the bull camp is unnerved by news of cease-fire talks in Egypt and will probably remain undermined because of further declines in US rate cut hopes ahead. While the gold and silver markets likely remain overbought, the very sharp second half of April declines have likely brought down the overdone status, but technical signals have yet to shift into a buy mode. In a slightly supportive technical signal, the second half of April washout in gold saw trading volume fall off with steady open interest which should leave the potential for bargain hunting in place for later this week.
COPPER
Once again, the copper market has defied fundamental gravity with a higher high overnight. We attribute the gains so far this week to a Reuters poll projecting the 2024 world copper market to post a 125,000 tonne deficit, with an even larger 2025 deficit of 137,250 tonnes projected by the poll. However, the ICSG pegged the 2024 world refined copper market to be in a surplus of 162,000 tonnes with that surplus projected to narrow in 2025 to 94,000 tonnes. It should be noted that daily LME copper warehouse stocks have continued to consistently decline at a modest pace. In a negative supply side report from yesterday, a Chinese mining company suggests their first quarter copper production increased by 123% with a March copper output tally of 450,000 tonnes. However, we suspect the reversal from the overnight high was the result of disappointing Chinese PMI data for April with 2 of 3 PMI readings falling from the previous month.
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