UVIX - A Week of Roman Candles | Benzinga
Source: Michael Ballanger 04/15/2024
Michael Ballanger of GGM Advisory Inc. shares his thoughts on the current state of the market, including moves in gold, silver, and copper.
As the weekend unfolds, precious metals enthusiasts the world over are going to be reading dozens upon dozens of "expert commentaries" on Friday's vicious reversals in gold and silver, being treated to a multitude of theories as to how and why these clearly overbought metals could be allowed to undergo corrections after multiple upside gaps and vertical ascents.
After the overnight and morning sessions produced outsized gains, with June gold touching $2,448.75 (up $76.05), it was thirty minutes before the close of trading in London when several enormous sell orders came in and not only halted the rally but triggered an avalanche of retail sell orders in the Chicago futures pit but also on the NYSE where both GLD and SLV set off my volume alert alarms with conspiratorial complaint.
The usual manipulation theorists out there (and you know who they are) donned their oversized cowboy hats and spoke of "MEMORIES OF DEC. 3-4" where an overnight advance was repelled by the bullion bank traders with follow-through weakness flooding the markets the following morning.
That pullback was short-lived back in December as it only took twenty-four days for the high at $2,134 to be re-tested and another sixty-two days for all-time highs to once again be surpassed.
May silver has been lagging the gold move rather sadly up until this week, with the resistance band between $26.47 and $27.39 being finally overcome on Tuesday, leading to a breathtaking advance of the near-vertical variety that came within a dime of the magical $30.00 level this morning at around 11:04 am.
What followed was the "stuff" about which best-selling books are written as silver went into a 27-minute swoon reminiscent of those Acapulco cliff-divers that we used to watch on the National Geographic channel when we were kids. Dropping from $29.90 to $28.74 without so much as even the slightest bounce, it settled the Friday session at $27.97, which was thankfully above the lows of the prior session.
As bad as Friday's action was, it barely avoided a "key reversal day" where a new high for the move reverses and takes out the low of the prior session. Technically, silver actually had a pretty good week, as did gold, with both registering green weekly candles and notwithstanding the bearish "tombstone doji" patterns that closed out the week; I rate it as a positive.
Quiet Move by Copper
Lost in all of the panting and gasping that went on as gold and silver threw their tantrums was the quiet little move that copper had. Copper traded as high as $4.362/lb. before all the noise of the PMs took hold of it, trimming the gain from nearly a dime on the day to slightly over $0.06 on the day but achieving a weekly close over $4.30 after challenging the January 2023 high at $4.365/lb.
With little fanfare and a modicum of splash, the red metal went about its business and quietly closed above $4.30/lb. for the best weekly close of the year now has its sights set on the January '23 high of $4.355 and the Mat '22 high of $4.59 before attempting to move to all-time highs above the critically resistant $5.00.lb. barrier. I believe that copper will trade up and through the all-time highs in 2024 as supply constraints brought on by mine depletion and the scarcity of new economically viable deposits combine to create a frightening structural deficit over the balance of the decade.
Even existing deposits on "care and maintenance" due to governmental interference or lobbying by the environmentalists that finally get permitted are still five to ten years away from producing copper concentrate capable of alleviating the shortage.
The Uraniumites out there that number in the hundreds that post thousands of articles every week on the growing demand and supply shortages facing the nuclear energy industry forget that despite the Chinese initiative to build over twenty-five new modular reactors in the next year or so, once completed, they will have infinitely more electricity to be pumped out to over one billion Chinese citizens.
It is no secret that the Chinese electrical grid is in dire need of modernization, which means expansion, and if they are going to expand their electrical capacity, they will need to expand the means by which electricity is transported through the country. I shudder to think of the amount of wiring that will need to be installed and, with that wiring, the amount of copper that will be consumed and never return to the recycling pool in any of our lifetimes.
This is why I have maintained a bullish bias for the balance of the year and the decade on copper, with a secondary emphasis on gold. Thus far in 2024, silver has been the hands-down winner, but only in the past two weeks did it eclipse gold as the top performer. While gold and silver require the emotional (and buying) support of Eastern culture, copper is a universal necessity for all cultures on the planet and, as such, will continue to grind its way higher against the looming specter of supply shortages.
For those dismissing the demand side of the equation and looking for G7 economic weakness in the second half of 2024, I counter that argument by referencing the impact of the emerging markets on copper demand. Many citizens of the EM world are only learning about desktop computing and the internet, as well as many of the basic aspects of the modern household.
All of these benefits in the name of "progress" require copper in some form or another, and no amount of tinkering with the yield curve or real interest rates, or U.S. reserve requirements is going to prevent excess demand for copper from altering the balance when it comes to price.
So, when I see the action in the precious metals create a maelstrom of protest and indignant shock versus the comparative halcyon of the copper market, I watch with morbid curiosity as the new participants to the world of precious metals ownership post Twitterverse messages of abject outrage blaming the ...