Written Commentary
GOLD / SILVER
Gold was down overnight as it tries to hold onto its October gains. As expected, Anthony Blinken left the Holy Land with no solutions or real support. But this political and military lull in the Middle East conflict has created a dull to slightly bearish trading environment for gold. With the war lacking flight to quality type anxiety, traders will now start to turn their focus back to the Fed Chairman speech on Wednesday. Despite two-sided volatility in the dollar last week and a range of 220 points, ultimately a downside breakout to the lowest level since September 20th is a major technical signal of a top in the dollar. While the latest Fed pause is largely responsible for the dollar failure last week, disappointing US jobs data adds to the downward track. Furthermore, US treasury markets appear to have bottomed out and have temporarily been aided by the pause and soft monthly US jobs readings. However, given the muted bullish reaction in gold from last week’s low in the face of very bullish signals from its primary outside market forces, the market shows a lack of bullish sensitivity. Even physical, investment, and jewelry demand has been soft with the Indian festival season hardly producing headlines this year. Many attribute the lack of Indian interest to the combination of high flat prices of gold and weakness in the rupee which is trading at less than half the value seen in 1995.
COPPER
Copper continued to rally overnight, despite weaker services and composite PMI readings, and weaker EU industrial data. However, lower US interest rates and a much weaker dollar provides ongoing tailwinds for copper, equities, and other physical commodities to start the trading week. Furthermore, copper price gains have come in the face of much lower imports from China and a string of soft Chinese data points. Demand for copper imports into China have been so low that Treatment Charges, or TC’s, have dropped by $88 over the past 5-weeks as smelters fight over decreasing imports. With copper prices rising, and the CNY being re-pegged to the dollar, many media outlets overnight are speculating that the Chinese government’s new $1tr bond issuance will be used as a huge stimulus package. So, this lull in Chinese copper imports might be short-term. Australia’s prime minister, Anthony Albanese, is in China this week to try and sign new resource deals during China’s “Import Expo”. News of large copper supply agreements could help give copper prices a further lift. Last week hedge funds reduced their bearish positions to a three-week low which probably fueled most of last week’s gains from covering.
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