Written Commentary
COPPER
After a new high for the move yesterday, the copper market reversed aggressively and with the lower low today, the market has likely forged a blowoff top. However, the selling yesterday might have been exaggerated by longs with profits on the month scrambling to the sidelines which in turn likely violated a series of chart support levels likely to spark waves of stop loss selling. We also suspect disappointing Chinese PMI data on Tuesday combined with a stronger dollar overnight and an extremely overbought spec positioning leaves the fundamental bias pointing down. Apparently, Chinese smelters are taking notice of the potential BHP/Anglo American merger as they fear battling a large competitor in their space. Overnight, the International Copper Study Group reduced its forecasted surplus for 2024 because of lower than expected copper production. Previously, the ICSG predicted a lofty 467,000 surplus of copper this year with the latest adjustment potentially signaling a nearly balanced 27 million ton global copper trade.
GOLD & SILVER
The deck is stacked against the bull camps in gold and silver today, with an upside breakout in the dollar, signs of higher treasury yields, fear of a hawkish Federal Reserve statement, and a lack of support from Chinese and European buyers overnight due to the May Day holiday. However, the gold market should derive some underpin from World Gold Council projections of continued brisk global central bank purchases, and signs of positive gold demand from India and China. Unfortunately for the bull camp, the WGC expects Indian demand to soften in the short-term in the wake of the record surge in gold prices and strength in the dollar. Therefore, gold should generally find support eventually given supportive longer-term demand views and could find support instantly if the cease-fire deal in the Middle East is rejected by either party. Unfortunately for the bull camp, the charts remain severely damaged and the prospects of improving chances of a US rate cut from today’s Fed meeting are very low. In conclusion, the trade has nearly extracted the hope for rate cuts this year with residual inflation readings likely to keep the Fed firmly entrenched on the sidelines. However, today will bring the first wave of monthly US jobs related reports with two of the three jobs today expected to signal softening.
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