COPPER
Clearly, the bull camp has regained the edge in copper as several bearish overnight developments have been discounted and the market appears to be poised to return to its November high up at $3.7255. Bearish overnight developments included another moderate increase in LME copper warehouse stocks of 4925 tons, the prospect of reduced Chinese refined copper imports from aggressive expansion of smelting activities and from chatter from the “Asian Copper Week” conference has indicated recycled copper will become more of a factor in Asia in the future. However, there has been a dramatic improvement in global economic sentiment which could result in a reversal of very soft Chinese overall export figures as global buyers of Chinese products regain confidence. On the other hand, the Chinese copper demand outlook remains negative, and the Chinese economy faces a long road to recovery with the worsening Chinese property sector, concerns of local government debt and what feels like a lack of confidence in national leadership.
GOLD / SILVER
Despite the short-term overbought technical condition in gold following a two-day low to high rally of $42, and a minimal bounce in the dollar early today follow-through gains are likely. However, the market’s reaction to the second key US inflation reading should be less significant as the trade has priced a large portion of the “end of the historic rate hike cycle” mentality. On the other hand, the gold market is not without fresh bullish developments with India reporting a significant jump in gold imports. Apparently overall Indian import readings for the April through October timeframe posted the sharpest ever jump from commodity imports ahead of and during the festival season. In fact, Indian trade officials estimate gold imports were responsible for 95% of the total import gains. Clearly yesterday’s muted US CPI report cleared the fear of further US rate hikes from the market, but the trade probably needs US PPI to reconfirm inflation is under control to put an exclamation point on one of the most aggressive and compacted rate hike cycles in history. Bullish interest toward gold and silver yesterday was so broad that gold mining shares leapt higher which is another sign of a bullish shift in investment interest.
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