Significant Gold & Silver Rallies

GOLD / SILVER

Apparently, expectations for a June US interest rate cut have returned which in turn fueled the most significant gold and silver rallies since early December. However, the CME Fed Watch tool did not show a significant increase in the probability of a June rate cut from just below 50% early last week to only 52.8% after the close Friday. Therefore, the gold and silver markets are anticipating the continuation of soft US and international data which has already resulted in widespread talk of euro zone, Japanese, and Canadian rate cuts in June. Surprisingly, the gold market managed the gains at the end of last week despite a temporary eight day high in the dollar, but the dollar ultimately closed weaker which in turn sets the gold and silver bulls up in a confident position to start the new trading week. It should be noted that the coming week will present an avalanche of global inflation readings which should keep the June rate cut issue in the windshield of the markets. Fortunately for the bull camp, the net spec and fund long positioning in gold recently dropped back into the middle of the last two years range as the net long positioning in this week’s report is clearly understated given that April gold rallied $57 from the report mark off. Therefore, the gold market likely retains speculative buying fuel. In a surprising development, May silver joined the gold rally Friday with the most significant rally since early December. For the bull camp, the net spec and fund long in silver sits near seven-month lows, leaving silver with residual buying capacity.

COPPER

The bulls received good news at the end of last week with headlines that the world’s largest copper producer (Codelco) indicating their 2023 output was the lowest in 25-years. Keep in mind, the major bull argument of the October through early December rally was expectations of ongoing tightening of above ground global supply! However, the bull camp was dealt a significant blow by a veritable explosion in Shanghai copper warehouse stocks over the last two weeks. Fortunately for the bull camp, general sentiment toward China has improved, thereby helping the copper trade discount headwinds from building Chinese domestic supplies. A Chinese national party meeting starts on Tuesday with some in the trade thinking a massive stimulus plan could be announced and we think that was the primary source of the bounce off last Friday’s low. Overnight a private Chinese Caixin Services PMI reading for February came in slightly stronger than expected providing fresh bullish interest for copper to start the new trading week. China will release their monthly import and export figures at the end of the week and given the significant buildup in Shanghai copper stocks last month, that data is likely to be bearish to copper prices.

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