Written Commentary
GOLD & SILVER
With Israel preparing for an attack of Rafah against the will of the international community, that is likely to give way to increased terrorist attacks on shipping in the Red Sea area and perhaps elsewhere in the world. In fact, a tanker was hit over the weekend, but the fire was contained. It also appears that Russia and Ukraine are stepping up attacks on energy related facilities and that could also yield sudden flight to quality lift for gold and bitcoin. Unfortunately for the bull camp, the US dollar showed significant strength at the end of last week and appears to have entered an uptrend pattern and that is likely to provide consistent headwinds for precious metal prices. Yet another pressure for gold prices came from comments from the Fed’s Bostic over weekend as he suggested he saw only one interest rate cut this year! Furthermore, with last week’s trading range a wide $76 and an aggressive reversal from a spike high posted on the highest trading volume since February of last year, last week presents an image of a top. Even though gold has corrected from last week’s high, prices are above the level where the last COT positioning report was measured and therefore gold is overbought and vulnerable to stop loss selling. Not surprisingly, the silver market is also in a corrective track and with open interest near the highest levels in several years and prices sitting nearly 3 dollars above last month’s low.
COPPER
Despite breaking a trend of massive weekly inflows to Shanghai copper warehouse stocks with last Friday’s modest outflow, the copper trade did not return to concern of tightening copper supply inside the world’s largest consuming nation. Furthermore, the International Copper Study Group pegged the world refined copper market in January to hold an 84,000 metric tonne surplus and that likely sparked the sharp range down move last week. Further adding into the bear case is news that Chinese copper smelters have agreed to increase usage of domestic scrap at the same time they curb output.
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