Written Commentary
COPPER
Copper’s mid-March updraft may be running out of near-term steam as it spent little time in positive territory during the overnight session. Better than expected readings for Chinese industrial production and Chinese retail sales have boosted China’s economic growth outlook while Japanese industrial production was better than expected. Today’s BOJ rate hike cast a long shadow over Chinese and global copper demand prospects and has put the market back on the defensive. There are ongoing concerns with the health of China’s property sectors, and that may be putting more pressure on copper prices. The potential for hawkish FOMC results tomorrow may also be sources of headwinds for the copper. LME copper stocks were lower today and have fallen to a new 6-month low.
GOLD & SILVER
While gold and silver saw divergent trading action at the start of this week, they are both on the defensive early on. There was a role reversal Monday with gold regaining the upper hand on silver as both remain close to 2024 price highs. The Dollar has extended its mid-March recovery to a 3-week high in the wake of the Bank of Japan’s first rate hike since 2007 as the Yen had a “sell the fact” reaction falling to a new low for the move and that in turn put early pressure on precious metals prices. The CME’s Fed Watch tool is projecting a 1% chance for a FOMC rate cut Wednesday and less than a 9% chance for a May rate cut, so the prospect of “higher for longer” US rates continues to be a source of headwinds for the gold market. The PGM sector remains under pressure as the prospect of no Fed rate cut at Wednesday’s FOMC meeting and the May FOMC meeting could weaken US demand for new motor vehicles.
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