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OUTSIDE MARKET DEVELOPMENTS: With the precious metals markets at times recently becoming almost exclusively focused on the direction of the Dollar, it isn’t that surprising to see the noted weakness in gold and silver prices into the early US Monday morning opening. While the precious metals markets have lessened their focus on the direction of equity prices recently, it seems like the weakness in equities overnight has also contributed to the bear case in the precious metals markets. With a number of foreign markets closed overnight (due to holidays) one could attribute part of the overt weakness this morning to thin trading conditions overnight. However, given the conclusive pattern of weakness in global equities and the noted strength in the Dollar, the net impact of outside market action this morning clearly seems to favor the bear’s camp. With a Conference Board leading indicator report the only scheduled US report due out today, the markets might not see enough fresh news on the economic front to alter the initial bias. It does seem as if some traders are concerned about an upcoming FOMC meeting later this week and that issue also seems to be favoring the bear camp in the metals markets.
GOLD MARKET FUNDAMENTALS: One might have expected talk of a Chinese purchase of IMF gold to be patently bullish toward gold prices this morning, but apparently the market is more concerned about outside market action, than it is of potentially supportive demand side news. Clearly some traders have come to the conclusion that the IMF/Chinese gold issue could eventually lend some support to the Greenback and that in turn has discouraged some gold players. One could suggest that the market was already aware of the Chinese intention (some would say the need) to increase their gold reserves, but in the end it is possible that a number of gold players will eventually see the Chinese IMF gold reserve purchase talk, as a major fundamental underpin for gold prices. In the short term, the gold market might be seeing some initial pressure off the latest positioning reports, which showed a further build in Speculative longs. Some players are also suggesting that the violation of the even number $1,000 mark on the charts early this morning prompted some technically related stop loss selling. At least initially, the December gold contract was able to recoil from its trek below the $1,000 level and that in turn prompted some traders to suggest that some bargain hunting buying was being seen.
SILVER MARKET FUNDAMENTALS: With a big range down extension in December silver in the early going today, the bears would seem to have a technical edge to start the new trading week. Clearly a strong Dollar is providing a large measure of the selling impetus, but it is also possible that broad based weakness in equity prices and broad based weakness in a host of physical commodity markets is adding into the selling impetus in silver trade this morning. Like the gold market, it is also possible that some silver traders are concerned that silver long positioning is overextended, in the wake of the most recent positioning reports. In short, the silver market is seeing a number of bearish internal and external factors and that probably puts the bull camp back on its heels in the early action today. It should be noted that silver exchange warehouse stocks did post a somewhat noted decline at the end of last week and that could provide the bull camp with some measure of confidence this morning.
PLATINUM: After making a series of record spec and fund long position readings several weeks ago, the Platinum market has once again seen another fresh record spec long reading in the latest weekly COT report. In fact, the “combined” spec and fund Net Long position in Platinum was 20,965 contracts as of early last week. In the face of a sharply higher Dollar, a record spec long and a lackluster economic view, one can suggest that the bear camp has a number of arguments in its favor. Near term downside targeting in the January platinum contract is seen down at $1,300.
COPPER: With a noted downside extension on the charts and a quasi technical failure already seen today, we suspect that the path of least resistance in copper for the coming two sessions is set to point downward. With an ongoing series of big builds in LME copper stocks, a noted rally in the Dollar and weak equity prices, the bear camp would seem to have a number of internal and external factors in its court this morning. While the September 15th Commitment of Traders with Options report for Copper showed the Non-commercial position to be net short only 1,988 contracts, with the Non-reportable position net long 1,144 contracts, and that made the “combined” spec and fund position net short 844 contracts as of early last week, the copper market wasn’t technically vulnerable off the COT readings. Initial downside targeting in the December copper contract this morning is seen at $2.74, with even lower targeting seen down at $2.72 in the event of a multi day slide in global equity prices.
