Written Commentary
GOLD / SILVER
With a risk off environment in equities and commodities overnight, gold and silver have paused/retrenched after significant gains. However, the initial landscape today favors further corrective action as US treasury yields have broken out to the upside perhaps in anticipation of today’s US Federal Reserve Chairman speech which many expect to reiterate the “higher for longer” mantra. On the other hand, the Fed has recently expressed concern for the drag on the economy from surging long-term rates and the Chairman might address that situation today. The gold and silver markets should retain a cushion from the ongoing fighting in Gaza. Unfortunately for the bull camp gold and silver ETFs have not shown inflows despite the sharp gains in futures prices, but for some that indicates the move has not peaked yet as small investors can buy highs and sell lows. Gold ETF holdings year to date are down 7.7% with silver ETF holdings down 4.4% year to date.
COPPER
Certainly, the copper market benefited from the positive Chinese economic data released Tuesday night, but the market lost its bullish buzz before midsession yesterday and fell back sharply indicating the bias remains down. The corrective setback was probably partly because of headlines indicating the likely failure of the Chinese real estate company Country Garden after they missed a $15 million debt payment. We also think copper was undermined by a large 11,000-tonne inflow to LME copper stocks yesterday and from news earlier this week of a 16% increase in quarterly production from Antofagasta as that erodes the tight supply argument held by some bulls. Yet another bullish development which has failed to lift copper prices is a slightly better-than-expected Chinese GDP for the July through September quarter, especially with economists drawing the conclusion that Chinese government stimulus has finally shown some results.
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