Written Commentary
GOLD / SILVER
With April gold breaking out to the highest level since January 19th, US interest rates continuing to decline, and a tight range bound dollars that leaves the bull camp with the edge, furthermore the market should find a fresh support from news that Indian 2023 gold imports that leaves the bull camp with the edge. While some traders are suggesting gold and silver are benefiting from the looming US FOMC meeting with expectations of dovish dialogue and not necessarily hope for an actual rate cut, we are skeptical of those views. Unfortunately for the bull camp, gold ETF holdings declined for the 8th straight trading session yesterday and silver ETF holdings fell by 2.1 million ounces. While the gold and silver markets have been aware of the rising tensions in the Middle East with escalation of attacks on merchant vessels, increased chatter in the trade suggesting Iran is orchestrating the increased attacks was amplified by the death of three US military personnel in the region by a drone attack. It is possible that the strength in the dollar yesterday was offset in the minds of the gold and silver trade by the latest downside breakout in US treasury yields. The second flight to quality development is the result of a court in Hong Kong ordering Chinese real estate development company Evergrande Group to begin liquidating its assets which in turn is likely responsible for the aggressive ongoing liquidation in Chinese equities. While silver is trading negatively in the early action, the market did post an upside breakout and the highest trade since January 16th, but we think the bull camp will need very positive leadership from gold to continue higher.
COPPER
While the mid-January recovery rally was very impressive, the copper market has stalled just under $3.89 likely because of the deteriorating Chinese economic condition. It should be noted that Chinese equity markets continued to fall sharply overnight but prices were probably supported by record lows in Chinese 10-year treasury note yields which seems to indicate expectations of a Chinese rate cut. Obviously, copper traders are concerned about softening Chinese copper demand following the latest travails of the ultra-critical Chinese real estate development industry. On the other hand, as indicated already, copper bulls are temporarily “saved” by ideas of additional Chinese government support which could include and 11th hour saving of the beleaguered Chinese property behemoth Evergrande. Unfortunately for the bull camp, the copper trade this morning is faced with a 19% higher annual production tally from MMG LTD, but that production was within the anticipated range. Copper prices might get support from a Reuters poll yesterday predicting average 2024 LME cash copper price will be higher than the average seen last year.
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