Gold Vulnerable to More Year-End Long Profit Taking

PRECIOUS METALS

For some traders, the slide in gold and silver prices this week in the face of a wave of foreign rate cuts and a widely anticipated US rate cut today is disappointing, leaving the path of least resistance down. An indication the bulls are waiting for even lower pricing is seen from Asian gold discounts reaching two month highs and ongoing liquidation of gold holdings. Overnight gold holdings fell 28,228 ounces while silver ETF holdings posted a minimal inflow of 577,386 ounces. The string of gold outflows is the longest since mid-November while total holdings are the lowest since mid-August. Unfortunately for the bull camp, at current prices, the gold market is vulnerable to further year-end long profit taking as this year’s rally has produced the largest annual gain since 2010. It should also be noted that a portion of the precious metal bull camp is holding out in hopes of a rate cut inspired bounce! In conclusion, technical and fundamental signals remain down with initial targeting in February gold seen at $2635 and at $30.51 in March silver.

COPPER

With news that Chinese November refined copper output fell 1.6% and with Japanese November copper cable sales declining by 6.3%, March copper forged another lower low this morning, leaving the market bias pointing down. It should also be noted that Chinese November lead and zinc output declined even more than copper production suggesting residually weak demand for industrial materials. In retrospect, the bearish bias in copper is partially verified by the markets inability to find support Monday and Tuesday from a weekend story noting a significant decline in Chinese (nonexchange) inventories across all regions. Short-term technical signals remain in sell mode and March copper has little in the way of solid support until $4.1120. Fortunately for the bull camp, the net spec and fund short in copper has dropped significantly from the 2024 high of 74,147 contracts to a recent (now overstated) net spec and fund long of 16,901 contracts.

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