Written Commentary
Ag Market View for Dec 13.24
December 13, 2024
GOLD & SILVER
Residual big picture global macroeconomic optimism leaves the bear camp in definitive control of both gold and silver. Obviously, the $150 per ounce slide in gold and the $3.05 drop in silver leaves the bull camp very anxious and the bear camp very confident. In fact, with the US rate cut now reality and the Fed indicating caution on future cuts a key bullish fundamental is now absent. However, in our opinion, the biggest bearish fundamental forces is the likelihood that “safe haven/flight to quality” precious metal longs will continue to move to the sidelines. Fortunately for the bull camp, the dollar has retrenched and appears to be downwardly biased. Unfortunately for the bull camp the dollar does not have competition from Chinese or European growth expectations and the bear case is lacking. Adding to the downward bias is lower price targeting for Barrick gold shares, the Turkish Central bank offering gold in exchange for lira and reports this week that the Chinese central bank is likely to pause its gold purchases for 6th straight month. A slight cushioning force could improve Indian festival demand given the slight moderation of prices but a combination of a weak local currency and near historical high pricing should keep festival buying restrained this year. Minimal longer-term supportive issues for silver are residual hopes of increased Chinese silver demand from their stimulus and a 1.86 million ounce addition to silver ETF holdings yesterday.
COPPER
We give the edge in copper to the bear camp today with the sharp rejection of the initial rally this week and because of an increase in Chilean September copper production. With one major Chilean copper producer posting a 14% year-over-year increase in September production, another Chilean mine posting a decline of 5.4% decline in September and a 3rd Chilean mine increasing September production by 5.2% overall Chilean September copper output increased. Therefore, continued large outflows of Shanghai copper warehouse supplies are mitigated especially with the trade seeing that trend extending. Overnight LME copper warehouse stocks increased by 125 tons while Shanghai weekly copper warehouse stocks fell by 13,559. As indicated in financial market coverage today, the trade is generally disappointed with the Chinese stimulus program especially with the first step a large capital infusion into local governments.
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