Written Commentary
GOLD / SILVER
Not surprisingly, gold and silver are under significant pressure following 24 hours of significant strength in the US dollar. Apparently, the gold and silver trade saw the Fed as “more hawkish” than expected. Furthermore, the dollar is within striking distance of contract highs this morning and a trade above 96.90 could spark another wave down in gold and silver prices. In a positive development that has been almost completely discounted, Chinese 2021 gold production reportedly fell by nearly 10% on the year. However, that positive supply news from China was offset by reports that Chinese net gold imports through Hong Kong declined by 43.9% in December.
PALLADIUM / PLATINUM
Seeing palladium track higher in the face of an upside breakout in the dollar, a definitive shift away from easy money policies, and weaker gold prices, highlights a market tracking its own fundamentals. Obviously, the threat of a major supply disruption in the event Russia is broadly sanctioned, is justification for the run higher in palladium over the last 3 weeks. Furthermore, signs of demand from December have bolstered bullish sentiment as Swiss palladium exports jumped by 367% on a month over month basis in December. So far, the platinum market has missed out on the explosive rally in the palladium market, partially because of the world’s smaller reliance on Russia for platinum supply and partially because the platinum supply and demand situation are not as tight as in palladium.
COPPER
In retrospect, a moderate portion of the gains on Wednesday were built on the idea that the Fed would take a middle of the road stance and that is likely the reason prices have held up over the last 24 hours. However, it should be noted that daily LME copper warehouse stocks have seemingly returned to a pattern of daily declines which should help underpin copper prices above $4.40.
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