Metals: For the second week in a row managed money accounts failed to join the exuberance being exhibited by record flows into ETF's in response to surging gold and silver prices. Both metals witnessed a second week of net-selling, primarily driving by fresh short positions. Most noticeable in silver where funds in a two week period to last Tuesday cut bullish bets by one-third while the metal surged by more than 22%.
The short-term outlook now increasingly points to consolidation with the real rates reversal on Friday sending a warning that no markets – apart from a few U.S. technology stocks, apparently – can continue in a straight line. Gold investors will be watching the dollar, real yields and US-China developments for inspiration, but after adding 250 dollars to the price in just three weeks, the market increasingly needs to consolidate and validate those gains.
Silver is potentially the most challenged with an overcrowded long in SLV:arcx ETF by equity focused newcomers, many of whom know little about how the metal behaves (strong rallies often followed by deep corrections). Platinum’s failure to join the rally and the gold-silver ratio returning to its long term average close to 70 also adding some short-term headwinds.
In addition, it’s worth mentioning fading support from industrial metals. Not least copper which slumped on Friday after Chile trimmed the 2021 price outlook due to a widening surplus. Ahead of the weakness, speculators had already started to trim their biggest long position in two years. This in response to coppers recent failure to challenge $3/lb and reports that the COVID-19 related impact on supply from South America was not as bad as the market initially had feared.