Written Commentary
COPPER
Clearly, the lack of news from China regarding a massive stimulus program announcement is undermining copper market sentiment early this morning. However, UBS has raised its 2025 and 2026 copper price forecast on expectations of a continued sharp decline in global copper production. The bull camp argues the declining copper production is a structural problem without easy fixes especially for slumping Central and South American production. UBS also predicted 2024 would result in a world refined copper deficit above 300,000 tons and suggested that shrinking supply is offsetting anemic demand growth. Fortunately for the bull camp, daily LME copper warehouse stocks have returned to a definitive pattern of daily declines with the pace of daily declines material. The copper market is also drafting buying support from a revitalization of US rate cut hopes which have been given credence by clear signs of softening data.
GOLD / SILVER
With both gold and silver posting higher highs overnight it is clear the bullish track from the prior three trading sessions has remained in place. Apparently, the gold and silver trade are not unnerved by the disappointing Chinese Caixin services PMI reading, but that could be the result of anticipation of a Chinese stimulus package announcement. However, as of this hour the NPC has disappointed the trade with plans to issue $139 billion of special bonds this year as that focuses on local debt issues instead of stimulating growth. On the other hand, equity markets in Shanghai closed higher despite the lack of an aggressive plan to spark the Chinese economy. Given the upside extension this morning and the lack of a Chinese shock and awe stimulus program, gold and silver must be drawing support from signs of softer global inflation. Surprisingly, investors continue to flee gold and silver ETF instruments despite record London gold prices yesterday and European and US gold prices nearing record pricing today. However, the markets will face a semiannual US Federal Reserve Chairman testimony to Congress today which could challenge the early theme today of “increased prospects of monetary easing” following signs of softer Euro inflation. Adding to the potential volatility today are several Fed speeches, US ISM services PMI, ISM services prices paid and US factory orders which are expected to post a significant decline.
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