Written Commentary
GOLD & SILVER
Precious metals have broken out to the upside in a very positive reaction to the FOMC meeting results. June gold has reached a new record high while May silver reached a 3 1/2-month high early in today’s action, and both are holding onto those gains this morning. Gold and silver have benefited from the sizable pullback in the Dollar after it reached a 3-week high before the FOMC meeting results. While the Dollar has found its footing, it remains well below Wednesday’s high and is providing support to metals markets. The Fed maintained a median forecast for 75 basis points in rate cuts this year, which was in some doubt before Wednesday. We suspect the Fed is attempting to remain neutral by noting inflation is still generally headed in the right direction, but also that risks are two-sided now. Therefore, the subject of a rate cut as a source of the gold strength is consistently being pushed back in time. We are entering the Indian wedding season and potential declines in gold bring in a measure of Indian buying, but currency and pricing considerations should leave this year’s purchases crimped. The PGM sector has found early support from a weaker dollar and stronger global risk sentiment, but concern over auto catalyst demand prospects have kept platinum and palladium lagging precious metals this week.
COPPER
Copper prices continue to see volatile two-sided action following Tuesday’s high for the move, but they have found fresh strength early in today’s action. Wednesday’s large daily increase in LME copper stocks put pressure on the copper market as it may reflect some softening of global near-term demand, but that was followed by a moderate decline this morning. Recent industrial production readings from the US, China and Japan have come in stronger than expected which have underpinned copper prices near their recent highs. There is concern over the high level of China’s copper stocks this year as that may diminish import demand over the next few months, and that could weigh on copper prices going forward.
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