GOLD / SILVER
While we suspect the bombing of a hospital in Gaza has sparked the sharp upside extensions in gold and silver prices today, it is also possible that a measure of improved physical demand hope from stronger than expected Chinese data is adding to the bullish mix today. While not a definitive supportive element in the early going, the dollar is poised just above a downside breakout point on the charts and could fail if estimates for US building permits match or come in below estimates. However, with crude oil prices jumping by more than $2.00 overnight, fear of a broadening of the conflict in the Middle East creates the potential for a large flight to quality event and rekindles fear of inflation potential inspired by surging energy prices. In fact, a summit in Jordan has been canceled after the Gaza hospital attack virtually eliminating the potential for a peaceful settlement in the near term. It should also be noted that December gold this morning broke out of a long-term downtrend channel to the upside again and with a close at or above current levels, the December contract will have closed above the seven-month-old downtrend channel resistance line 3 times. The silver market continues to show more bullish resiliency than the gold market, indicating it is tracking it’s both financial and physical commodity market events.
COPPER
We are very surprised with the upside breakout in copper this morning following a massive 11,000-ton inflow to LME copper warehouse stocks. However, very upbeat Chinese economic data released overnight shifts the bias in copper to the upside as Chinese copper demand is the penultimate force in the copper trade. Unfortunately for the bull camp the rally is tempered by the massive jump in LME copper warehouse stocks which are now at the highest levels since October 2021. Apparently, the significant jump in LME warehouse stocks was the result of a significant jump in their warehouse inventory facility in New Orleans. In a very minor supportive supply development, Bloomberg overnight is reporting a tight scrap copper which can be a preferred import source for China. While the copper trade has not paid specific attention to the ebb and flow of US economic activity, it is possible that better than expected US retail sales, US industrial production, and capacity utilization readings from yesterday have sparked a glimmer of improving US copper demand hope.
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