Written Commentary
GOLD / SILVER
In retrospect, the action in gold and silver this week has been nothing short of stellar given periodic adversity from strength in the dollar. Furthermore, gold managed to shrug off headwinds from signs of slowing in the US and European economies especially with gold at times over the last several weeks seemingly benefiting from “hope” of a recovery in physical/industrial gold demand following a global macroeconomic euphoria wave. Apparently, the gold trade interpreted yesterday’s US PCE report result as a sign inflation was slowing which apparently keeps US rate cut hopes alive. However, overnight inflation showed signs of resiliency in Europe and the trade will be presented with a US ISM Manufacturing prices paid reading later this morning. Despite a very consistent pattern of daily outflows from gold ETF holdings, gold prices are in an upward bias with higher highs and higher lows the general rule since February 15th. In conclusion, the bull camp has managed to shape most developments in their favor and or has managed to discount adversity from outside markets which is a hallmark of bullish control.
COPPER
The downside breakout in May copper overnight was justified by Chinese news overnight. While there were some bright spots in official Chinese non-manufacturing PMI, and a positive private Chinese manufacturing PMI result, a second straight week of massive inflows to Shanghai copper warehouse stocks is a development likely to extend the correction from the late February high. In fact, over the last two weeks Shanghai copper warehouse stocks have increased by 127,000 tons following last week’s 109.6% gain and this’s weeks gain of 18.3%. However, the copper bull camp should remain confident in longer-term copper price prospects as Reuters overnight indicated Codelco (the world’s largest copper producer) continues to see production fall from classic operational problems and sovereign government intervention/regulations.
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