Written Commentary
COPPER
The copper market fell back sharply from Monday’s spike up new high for the move, probably because of disappointing Chinese overall export data as the Chinese economy remains heavily reliant on foreign consumption to propel their economy. Apparently, the decline in total exports completely overshadowed the increase in Chinese copper imports last month. In fact, Chinese January through October concentrate imports were 22.6 million tonnes versus 20.7 million last year, while October Chinese copper concentrate imports were 2.31 million tonnes versus only 2.24 million in the prior month. However, countervailing the strong concentrate import figures were lower January through October Chinese unwrought copper and copper product imports. Furthermore, a continued slide in domestic Chinese “treatment charges” for copper normally signals an oversupplied domestic market. This would make sense given the large jump in copper imports this year, in the face of a very slow domestic real estate market. This could also be the reason that Codelco is now cutting its copper premium by 36% on shipments to China. On a bullish note, for copper supply there has been a pronounced drop in copper exports from Chile for the past several months as miners sound the alarm on the lack of clarity in Chile’s new mining royalty laws. Lastly, the truckers strike in the Democratic Republic of Congo risks delivery of physical copper over the next several weeks.
GOLD / SILVER
With the dollar posting a three day high early today, gold lingering near yesterday’s lows and holding below the 200-day moving average at $1982.90, the bear camp has extended control. In fact, a notable Gold ETF holdings inflow yesterday of 136,494 ounces and news that the UK government is sanctioning two of Russia’s largest gold producers have been largely discounted by the financial Press this morning. In fact, the UK government indicated they are specially cracking down on Russian gold and oil networks that are providing funding for the Russian war economy. Unfortunately for the bull camp typical bearish dollar developments are being discounted in the currency trade and perhaps more importantly the prospect of further declines in US treasury yields has been pushed to the sidelines by Dollar traders. However, today will bring a full slate of US Federal Reserve speeches, with the US Federal Reserve Chairman speech early today likely to set the tone for the rest of the session.
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