Written Commentary
COPPER
The copper market has clearly reversed and strongly rejected yesterday’s new high for the move in a fashion that shifts control back to the bear camp. In fact, short-term technical indicators have shifted into sell modes which in turn have completely overshadowed news that Chinese copper imports increased last month. Chinese January through October concentrate imports were 22.6 million tons versus 20.7 last year. Furthermore, October Chinese copper concentrate imports were 2.31 million tons versus only 2.24 million tons in the prior month and month over month. Furthermore, Chinese wrought copper and copper product imports expanded. However, countervailing the strong concentrate import figures were lower January through October brought unwrought and product imports.
GOLD / SILVER
Gold has been a one-way bearish trade the entire overnight session as traders seem to be unwinding long positions on the back of weaker than expected Chinese data and an ongoing bounce in the dollar. Some of the normal bullish gold catalysts have been completely discounted. Furthermore, Benjamin Netanyahu announced that Israel will now take ‘indefinite’ control over Gaza, and that has failed to give support to gold prices. On the bullish side, China recorded a record gold holding this month with 71.2Mn ounces. What makes this data unique is the fact that Chinese FX reserves dropped sharply over the past three months, which normal signals weaker gold demand, as they dollar-cost-average their holdings. In short, China is now expanding gold reserves, even despite smaller total FX reserves. While the Diwali festival starts early next week, and that might provide a potential uptick in India jewelry demand initial predictions by Indian jewelry dealers projected soft demand. However, those soft demand predictions were heavily predicated on expensive pricing and further price declines could entice Indian buyers. While US yields have come down significantly recently, very hawkish comments from the Fed’s Cook and Kashkari heavily offset last Friday’s lukewarm employment situation report.
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