Written Commentary
GOLD / SILVER
Gold and silver are showing bullish resiliency this morning as the upside breakout extension in the dollar has not thrown prices into negative territory. While the action in the treasury markets is not distinct this morning, gold and silver traders appear to have shifted some of their focus back to currency action. On the other hand, the markets are betting heavily on a top in US treasury Note yields at 5% and a breakout above that could compound the negative impact from the surging Dollar. However, the situation in the Middle East clearly underpins prices with Putin’s prediction overnight of a likely spread in Middle East tensions adding to the pre-existing flight to quality argument. Therefore, petroleum price action should be monitored closely with gold and crude oil tethered together and crude oil likely to be the first to react to any fresh incendiary development. Unfortunately for the bull camp US scheduled economic data today is likely to lift the dollar and treasury yields further which will create some headwinds for gold and silver.
COPPER
In retrospect, the bull camp should be disappointed with the action in copper this week as another round of Chinese support for their economy, their banking system and local governments should have resulted in copper prices maintaining an early 10-day high yesterday and extending today. Furthermore, the bull camp should be emboldened by another large daily outflow from LME copper warehouse stocks overnight, which put the net withdrawal this week above 8,000 tonnes. However, the copper market was undermined yesterday by strength in the dollar and a jump in US treasury yields and we suspect that outside market negative will be present again today. In a very minimal positive development yesterday MMG LTD announced a 2% decline in quarterly copper cathode and copper concentrate production.
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