Metals Meltdown
Copper – Tumbling U.S. shares and a stronger Dollar have sent Copper futures sharply lower in early trading. Outside markets – namely precious metals and energies – and profit-taking have also weighed on Copper prices. Yesterday’s reluctance to break through the $4 mark, though not all that bearish technically, may have sparked some of the profit-taking. Despite last week’s somewhat positive economic data, many uncertainties remain for the U.S. economy, underscored by the terrible employment data last Thursday and Friday. The May contract remains bullish on the daily chart even though the market failed to break through the psychological $4 mark. A close below 3.87 may be seen as bearish near-term and could lead to further profit-taking. The market was overbought as of yesterday’s close and the slow stochastics crossed over to the downside, both of which can be viewed as negative in the near term. Support comes in at 3.94, 3.90 and 3.87, while resistance can be found at 4.01, 4.04 and 4.08.
Gold and Silver – The rebound of the greenback against the majors has weighed on the precious metals in early trading. Lower energy and food prices have cooled the inflation outlook, making precious metals less appealing as an inflation hedge. Fears of recession in the U.S. economy are not only pointing to tamer inflation, but may impact jewelry demand. If emerging economies like India and China that have caused an increase in jewelry demand falter, precious metal prices may feel more downside pressure. The IMF announcement that it is selling over 400 metric tons of Gold has dragged slightly on the market thus far and could potentially pressure prices to a much larger extent when the sale is made, especially if physical demand is weak at that time.
June Gold prices have rebounded after testing support at 880, but the chart indicates that the market is vulnerable after failing to hold advances beyond chart resistance at 930. Advances beyond 930 and 945 may be needed to attract buyers, but the near-term relative high of 959.60 may offer stout resistance. Support for June Gold comes in at 916.20, 905.70 and 896.90, while resistance can be found at 935.50, 944.30 and 954.80
The May Silver chart continues to show weakness, but the market’s ability to hold support at 16.850 is somewhat encouraging. After breaking down further than the double top’s measure, the market has twice closed below the $17 mark only to rebound in ensuing sessions. A close above the relative high close of 18.55 may shift the technical bias to the bulls, while a solid close below 16.85 could signal more downside, possibly even triggering moves below $15. Support comes in at 17.805, 17.49 and 17.25, while resistance can be found at 18.36, 18.60 and 18.915.
Rob Kurzatkowski, Commodity Analyst
