COPPER
Clearly, the copper trade is embracing the theory of slowing global activity, with the added pressure coming from negative spillover from most industrial/physical commodity markets. In fact, the trade was presented with fresh copper demand concerns from China following a much lower than expected Chinese new loan reading. Along the lines of disappointing Chinese copper demand views, China’s copper cathode production in November posted a decrease of 3.3% on a month over month basis which is partially offset by the fact that production versus year ago levels was positive with a gain of 6.8%. Fortunately for the bull camp, Dow Jones floated a story overnight confirming fears of tighter supplies in Asia and from ongoing twin production glitches in South America. Unfortunately for the bull camp Peruvian copper output in October increased by 1.9% which means production setbacks in the country took place after the end of October.
GOLD & SILVER
Down trends in gold and silver are likely to extend with initial US inflation readings soft but the dollar does not show definitive weakness from that news. The bear camp should also be emboldened by the prospects of slumping Chinese physical demand as troubles in the Chinese economy should crimp Chinese gold imports. In fact, some analysts have suggested financial pressures in China could slow Chinese central bank gold purchases. However, both gold and silver have relinquished significant premium in the face of an environment where the trade expects global central bankers to be shifting back into a supportive stance suggesting gold and silver could find a bottom soon. The November US CPI and core CPI readings were mostly in-line with market expectations, and that kept the Dollar under pressure which in turn provided only thin support for gold and silver prices. US longer-term yields have seen a modest pullback this week while the 30-year bond auction found decent demand, both of which provided additional support to precious metals prices. There will be another set of US inflation data for the market to digest with the November readings for PPI and core PPI early in the day, but the “main event” will come in early afternoon with the results of the December FOMC meeting. There is little doubt that the Fed will keep rates on hold, but they will also provide their quarterly economic projections and post-meeting comments from Fed Chair Powell.
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