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OUTSIDE MARKET DEVELOPMENTS: Equity markets in Asia and in Europe have been mostly higher overnight, which helped US stock indices to post solid gains as we approach the US opening. The Dollar is mostly weaker this morning against the major currencies, although it was able to have a small gain against the Yen. As rumored in yesterday’s markets, China’s trade surplus during May was roughly $19.5 billion, much higher than forecasts and up nearly 50% from last year’s levels. Chinese exports were also significantly higher as was expected by the trade yesterday. Fed Chairman Bernanke said that the US economic recovery was on solid footing, but growth in job creation would lag. The Federal Reserve Beige Book indicated that economic conditions improved throughout all 12 of the Federal Reserve districts last month, although the pace was modest in some areas. Several US senators have proposed legislation that would put pressure on China to revaluate their currency against the Dollar. The United Nations approved a new round of sanctions against Iran, due to an escalation of their nuclear program. BP announced that a containment cap placed on a leaking oil well in the Gulf of Mexico had increased the amount of oil it was capturing. An auction for Spanish 3-year bonds was well received by the market as the issue saw solid demand. Japanese GDP was up 1.2% for the first quarter, in line with expectations. German CPI was up 1.2% during May, in line with market forecasts. Today’s US economic calendar includes April International Trade and Weekly Jobless Claims, both released at 7:30 AM. The final leg of the monthly US refunding, the 30-year bond auction, will have results announced at 12:00 PM.
GOLD MARKET FUNDAMENTALS: With a favorable Spanish auction result overnight, a much stronger than expected Chinese export tally and an upward bias in many global equity markets, it would seem like the flight to quality angle in gold is still being tamped down in the early trade today. In looking back to the prior trading session, the gold market saw comments from the US Fed Chairman that pointed to the potential for serious ramifications if the US didn’t move to get its fiscal house in order, but yet that type of news was unable to provide a positive bid for gold prices. In fact, news of another decline in South African gold production overnight of 6.2% from the prior month is apparently of little interest to the gold trade this morning. The market might also be under some pressure as a result of comments from China suggesting that the gold market was too small to garner investment allocation from the Chinese currency fund. However, since China also showed a noted rise in gold reserves held by the People’s Bank of China, it is possible that the potential lack of allocation from the Chinese currency reserve sector might be discounted. However, the main focus of the gold market still seems to be locked onto the ebb and flow of European debt fears and it would appear that we are seeing a lack of fresh anxiety on that front this morning. Comex Gold Stocks were 10.797 million ounces down 460 ounces.
SILVER MARKET FUNDAMENTALS: At least in the early going today, the silver market seems to have attached its wagon to the gold market again. Apparently moderately higher equities and generally positive action in the industrial metals markets is of little benefit to silver. In other words, the silver market is apparently seeing some selling off a further decline in flight to quality psychology. Even a higher energy market this morning has failed to provide support to silver and that isn’t surprising considering the recent heavy dependency of flight to quality potentials. Technical traders might note that July silver has remained below its 50 day moving average in the Thursday morning trade. Comex Silver Stocks were 117.630 million ounces down 831,599 ounces. Stocks have increased 12 of the last 20 days.
PLATINUM: With the platinum market showing positive progression early this morning, it is clear that platinum and copper are both behaving like physical commodity markets facing a slight improvement in macro economic expectations. However, it is difficult to suggest that platinum is poised to soar through resistance at $1,550 unless the equity market really extends on its initial gains. In short, we see short covering and a minor amount of fresh outright buying but without a more definitive end to the Euro zone debt fears, we have to suggest that bulls remain skeptical toward the upward track in platinum prices.
Copper: Higher on Tightening Supply Concerns
by Dave Hightower on February 7, 2011
Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The Copper market has managed a fresh new all time high price in the early action today and has done so off favorable macro economic views. The copper trade continues to push the idea that copper supplies are likely to tighten in the face of an ongoing global macro economic recovery. Apparently the market doesn’t need active participation from the Chinese to carve out more new all time highs on the charts. Apparently the market is concerned that power issues in Chile will prevent that critical producer from ratcheting up output in the face of a growing global economy. With nearby copper prices to this morning’s highs, sitting as much as 10 cents a pound above the level where the COT report was compiled early last week, the long positions are probably building.
The Commitments of Traders Futures and Options report as of February 1st for Copper showed Non-Commercial traders were net long 24,711 contracts, an increase of 799 contracts. The Commercial traders were net short 28,061 contracts, an increase of 567 contracts. The Non-reportable traders were net long 3,350 contracts, a decrease of 233 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 28,061 contracts. This represents an increase of 566 contracts in the net long position held by these traders. LME Copper Stocks were 393,525 tons down 625 tons.