Copper bears are still firmly in control as rising bond yields, an upside breakout in the dollar, an increase in weekly Shanghai copper, and an increase in “social copper/regional inventories” should embolden the bear camp. However, a portion of the copper trade continues to expect Chinese easing and the speculative trade in copper has likely seen its net short position jump significantly this week. With bond bulls questioning the timing of their rate cut bets, copper demand is potentially vulnerable to key shifts in economic perceptions today. Overnight, Freeport asked the Indonesian government for an exception to the new export ban on copper, as they wish to continue exporting copper even as the new restrictions take hold this month. If this request is denied this ban could add to the already worrying drop in global copper exports. Today’s Non-Farm Payroll release will give copper bears a better idea of potential shifts in global copper demand and interest rates.
GOLD & SILVERWith a rising dollar and rising interest rates pressuring the markets again this morning and the prospect of US rate cut being pushed back with further strong US jobs data today, the slide from the late December high is likely to extend in earnest today. Keep in mind, US non-farm payroll counts are still “growing” (albeit monthly additions are shrinking) and impatient bond traders have started to question their perception of the potential for a March cut. Therefore, it is not surprising gold and silver are weakening in the face of yields reaching the highest levels in a month. However, the bull camp is not without some fundamental support as the decline in gold prices this week has reportedly sparked some Indian bargain hunting buying. Unfortunately for the bull camp, the Perth Mint announced overnight that demand for bullion, especially from the US, has dropped significantly, with gold sales down 40% from last year. However, residual weakening demand fears are partially offset by signs of lower production. In conclusion, outside market forces look to continue to dominate gold and silver with the prevailing bias from outside market influences favoring the bear camp.
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