Written Commentary
COPPER
While the copper market did not post a lower low this morning, the charts remain definitively bearish with the lower high and lower low pattern likely to extend straightaway. Despite higher Chinese equity market action overnight, a risk off mood exists in Southeast Asia and in most of the world, leaving copper demand concerns from last week in place. However, the copper market should see support from news that a major Chinese bank has listed 41 developers who have been authorized for funding support, as that provides minimal solace for the property sector. However, with the largest Chinese private property developer overnight indicating the property markets in China will remain weak and could face “severe challenges”, assistance to Chinese property developers probably indicates the Chinese property sector remains on the ropes! Not surprisingly, the world’s largest iron ore exporter Rio Tinto sees Chinese stimulus supporting the broader economy in China, but that optimism is in the minority among analysts.
GOLD / SILVER
In addition to gapping higher overnight, the dollar index reached the highest level since December 13th in a reaction that appears to carry follow-through potential. Adding into the bearish track for gold and silver to start the new trading week, US treasury yields are climbing and gold ETF holdings at the end of last week had posted nine straight days of outflows, with holdings last week reduced by 656,635 ounces. Year-to-date gold ETF holdings are already down 1.2% while silver ETF holdings are down only 0.6% year to date. From a longer-term perspective, the gold market could see lift from Chinese President Xi Jinping who announced China would push for high quality development of its financial sector and would accelerate the creation of a modern financial system as that necessitates the need for a faster expansion of Chinese central bank gold reserves to backstop its currency in the eyes of the world trade. Along those lines the markets will be presented with Chinese retail sales and GDP readings tonight with expectations calling for a slight deceleration of growth on a month-to-month basis.
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