Written Commentary
GOLD & SILVER
From a technical perspective, it appears the gold market has found temporary support with the rejection of Friday’s spike down and positive close. However, fundamentals have not improved with the US central bank tempering December rate cut hopes, Indian inventory replenishment following two festivals potentially complete, central bank buyers remaining on hold and the uptrend in the dollar still alive despite the semblance of a blowoff top late last week. In a potential bearish signal, the Turkish central bank is offering gold for lira swaps of three tons this week which conflicts with recent market sentiment that most global central banks remain in a gold buying mode. Unfortunately for the bull camp, Asian Indian premiums reached a four week high as that highlights some buying of dips has already taken place. Apparently Indian spot gold prices reached a $16 an ounce premium over the government price reportedly from the rebuilding of jewelry inventories brought down following two major Indian festivals. Lastly, with Chinese demand reportedly still anemic and Hong Kong premiums increasing last week, it appears Asian buyers are waiting for further corrective action. Unfortunately, the bull camp hedge funds cut their bullish positions in gold last week and rising treasury yields leave downward pressure on gold and silver prices to start this week.
COPPER
On the one hand, the December copper contract clearly rejected a test of the $4.00 last Thursday leaving that level a critical pivot point support price this week. However, with the Chinese currency continuing to erode, sentiment toward the Chinese economy mostly negative, the large 9000 ton decline in Shanghai copper warehouse stocks last week has provided minimal support for copper prices. Last night LME copper warehouse stocks declined by 350 tons. In fact, Chinese October aluminum imports declined by 8.7% and that would appear to signal a weak economy and perhaps leave selling interest hanging over copper. On the other hand, Chinese steel exports jumped sharply last month in a development that provides some hope for the Chinese economy.
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