Written Commentary
GOLD / SILVER
With an upside breakout in the US dollar overnight surprisingly forged in the wake of a series of soft US data points over the last 5 sessions, the markets are expecting today’s US GDP report to partially right the ship of the US economy. Expectations for US GDP call for no revision in a previous growth rate of 3.3%. While not a definitive bullish impact, a Russian gold mining group indicated last year’s gold production declined by 6.8% on a base output of 412,500 Troy ounces. With a slight moderation of macroeconomic optimism from the lofty levels seen last week, an upside breakout in the dollar to a six-day high and a violation of close in chart support in April gold, the stage is set for a retest of $2025. It is also possible that trading ranges in gold will narrow after today’s GDP report and ahead of midday Fed speeches, as the approach of the US Federal Reserve’s favorite inflation measure (PCE) on Thursday could be a major influence on any remaining chance of a first-half US rate cut. In retrospect, given the failure to rally yesterday in the wake of another lower low move in the dollar, the bull camp in gold is losing resolve.
COPPER
Despite another decline in daily LME copper warehouse stocks, reduced housing market restrictions in Hong Kong, and predictions that Chinese solar installations will be near record levels again this year, copper has failed on the charts with a six-day low and should see spillover pressure from the upside breakout in the US dollar and from overnight declines in Chinese equities of more than 1.25%. While it appears that LME copper warehouse stocks have returned to a pattern of daily outflows, copper should be undermined by Chinese copper demand concerns off residual soft treatment charges inside China. Even though US GDP will not have a massive direct impact on copper prices, the report could have a significant impact on markets that impact copper!
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