GOLD & SILVER
Volatility is likely to continue in gold and silver as the trade continues to waffle back and forth from the ebb and flow of potential central bank policy bias changes. In fact, today’s US scheduled data window will likely add or subtract to the first quarter rate cut assumption, but we give the edge to the dollar bears/gold bulls from the potential for a softening US economy take away through this morning’s US reports. Another minimal limiting impact on gold and silver today is the developing pattern of outflows from ETF instruments, especially with gold outflows falling over the last six trading sessions. In fact, it appears that investors are banking profits on gold and silver ETF instruments in a sign of doubt of the bull case. Another bearish development overnight came from the Russian finance minister who announced Russia will sharply decrease their gold purchases due to lower-than-expected oil revenues. Fortunately for the bull camp, US data has been perceived as “softening” and that is the primary bullish theme unless proven otherwise this morning.
COPPER
After weeks and months of disappointment regarding Chinese economic prospects, the copper market has seen several favorable Chinese readings and that appears to have sparked fresh speculation of an improvement in Chinese copper demand. It is also possible that the copper market saw a wave of short covering last week following the market’s perceived pivot by the US Fed from on hold to potentially cutting rates late in the first quarter next year. While the copper trade has not focused intently on global copper exchange warehouse stocks, those stocks continued to tighten with Shanghai copper warehouse stocks declining by 27% in just one week. Furthermore, bullish supply forces from the prospect of lost supply from Peru and Panama provides copper with bullish supply and demand arguments. In a longer-term bearish development China reported this morning that they expect around 25% of their solar panel producers to go bankrupt in 2024. The Chinese solar sector has been a major growth market for copper demand.
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