Written Commentary
GOLD / SILVER
Gold fell to its lowest level since December 22 overnight as the market fell on expectations that the Fed will continue its tight policy. Scheduled data on Friday suggested more tightening ahead. News overnight was bearish from the fundamental side as well, with China’s net gold imports via Hong Kong reported at 22.24 tonnes in January, down from 42.16 (-47%) in December. Strong economic numbers could be positive for silver industrial demand, but the market followed gold lower on Friday and overnight, reacting negatively to the strong price data with March silver trading to its lowest level since November 4. Bloomberg reports that ETFs cut their holdings by 17,046 ounces in the last session and by 347,017 last week. It was the 11th straight day of declines. Silver holdings fell 3.194 million in the last session, a 1.7% decline. The CFTC has started to release its backlog of Commitments of Traders report. The most recent data was as of January 31, and it showed managed money traders were net buyers of 4,909 for the week, increasing their net long to 111,540. This was their highest since last April. The market has sold off considerably since February 2, so we suspect that net long is quite lower by now.
PALLADIUM / PLATINUM
April platinum moved higher overnight after trading to its lowest level since October 21. Like gold and silver, the market was pressured last week by higher-than-expected PCE and retail sales data that suggested the Fed would keep its tight monetary policy for a while. The January 31 Commitments of Traders data released on Friday showed managed money traders were net sellers of 5,848 contracts of platinum, reducing their net long to 7,364. Given the sharp selloff since that date, we suspect the net position could be close to flat by now. The market may have gotten a bit oversold, but the bias is still down. Palladium holdings were down 649 ounces in the last session and down 1,597 for the week. They were still up 6.4% for the year. Managed money traders were net sellers of 1,153 contracts for the week ending January 31, increasing their net short to 3,611, a new record. The market is $50 lower since that date, so we can infer that the net short is even more extreme.
COPPER
After early downside follow-through, copper prices climbed into positive territory overnight. In addition to risk-off anxiety flowing from a hard washout in equities, copper probably saw fresh selling on Friday after the pattern Shanghai copper warehouse stock inflows was extended for a ninth week in a row. LME copper stocks had a modest increase this morning; it was the fifth build in the past 10 sessions. Chinese equity markets had a lukewarm start to the week, but a moderate risk-on mood in European and US equity markets provided copper with some fresh support. The dollar has fallen back from an early 7 1/2 week high, and this has also underpinned copper prices.
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