Written Commentary
GOLD & SILVER
Apparently, gold, and silver traders have had a change of heart over the weekend as the recent revival of US rate cut hopes have seemingly dissipated overnight perhaps because of the prospect of lingering inflation signals from the US PPI report tomorrow. However, expectations for the report call for a 0.2% gain, which will match the previous month and in turn that could mean inflation has continued to grow over the last four weeks albeit at a softer rate. In another negative, the gold market continues to see signs of high prices adversity in the Indian gold trade. On the other hand, economic news from China recently has revived signs of growth and that could help to countervail negative Indian demand conditions. In addition to seeing Chinese economic data improve, there have been recent signs of a slight softening of the US jobs market, generally positive sentiment flowing from equities and intensifying battles between Israel and Hamas over the weekend. On the other hand, the gold and silver trade appear to readily embrace any minimal increase in the prospects of a US rate cut later this year, and therefore this week’s US PPI and CPI reports will be critical in determining if the US rate cut timing is drawing near or is pushing back into the future. Expectations for this week’s US producer price index reading call for a gain of 0.2% which would equal last month’s gain and that in turn would leave inflation above the Fed’s target.
COPPER
While the massive range up rally on Friday showed signs of a “blowoff” top, the latest news from China has improved and the strong opening this morning shows a market with bullish resiliency. Therefore, traders should intensify their monitoring of Chinese equity markets, Chinese economic reports and fluctuations in the dollar and yuan. From a technical perspective, the copper market might have posted a blowoff top last Friday with the latest COT positioning showing the net spec and fund long at 69,509 contracts which is approaching the record spec long of 87,302 contracts from February 2021. In fact, we suspect the COT positioning report dramatically understates the current net spec and fund long in copper as the market managed to rally $0.14 into the high Friday from the level where the COT report was measured.
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