PRECIOUS METALS COMMENTARY
10/27/15
The bear camp retains a modest edge in a choppy 2-sides trade
OVERNIGHT CHANGES THROUGH 6:05 AM (CT):
GOLD -0.40, SILVER +0.00, PLATINUM -6.70
Early Gold Change -$1.00 from prior the session Copper Stocks 274,075 tons -3,875 tons Shanghai copper stocks +11,387 tons to 181,736 tons
OUTSIDE MARKET DEVELOPMENTS: International equity markets were mostly lower overnight with the exceptions being the CSI 300 and the Shanghai Composite which managed to claw out minimal gains. There were no significant economic reports released overnight but the UK was scheduled to release 3rd quarter domestic production that analysts expected to rise by roughly +0.6%. The US economic calendar kicks off with September durable goods orders that are expected to have improved from the -2.3% decline in August, but remain in negative territory. The next US data window provides a look at the August Case Shiller Home Price index which is forecast to have ticked fractionally higher than the 5.1% year over year rate from July. A private reading on October services PMI is expected to have declined from the 55.6 reading in September. The next US data window offers October US consumer confidence that is forecast to have ticked lower than the 103.0 print from September.
GOLD / SILVER
The gold market benefited from slack US scheduled data yesterday because that undermines the Dollar while potentially delaying Fed action but for some traders that also increases gold’s safe haven allure off economic uncertainty. While the Dollar was weak early this morning it remains close to the recent highs and that leaves the currency impact as a limiting and somewhat threatening issue. In a positive development Gold Fields Mineral Services indicated that global demand for gold actually increased by 7% in the 3rd quarter relative to a year ago figures but that potentially bullish development was countervailed by news that the gold market probably remained in a 51 ton surplus in the quarter. The WGC also documented a moderate increase in gold imports into China for September of 97.6 tons imported relative to just 59.3 tons a year ago! With more slack US scheduled data later this morning expected from durable goods (estimated to be down 1.3% or more) the bulls hope to be able to regain some control. The trade continues to discount or delay its reaction to the news that the Indian gold scheme might be set to start in the coming weeks because it is difficult to determine just what the impact on gold prices will be, as the program looks to facilitate organized investment in gold but it could also eat into Indian gold import demand as Indians begin to diversify. An issue that was also mostly discounted in recent trading sessions was news that Chinese analysts predicted that gold demand in China might be set to return to levels near 1,000 tons because of the July and August turmoil in the Chinese equity markets and the Chinese currency markets have sparked interest in hard assets like gold. From a technical perspective, the December gold chart still looks vulnerable with a well-defined series of lower highs and lower lows. With open interest also generally rising on the recent slide in prices, it would appear that the trade has remained interested in pressing the short side of the market despite lower entry levels. If the bear case wasn’t in vogue, we would expect lower gold prices to result in declining participation in open interest figures. In looking ahead, the FOMC meeting starts today and culminates on Wednesday with a statement and decision on rates, and therefore traders might expect to see some shorts exit from positions established over the last 2 weeks and that could result in a minor bounce in prices especially if that takes place on low volume. Another issue that traders should watch for is a sharp increase in volatility into and through the Fed window Wednesday afternoon.
