Written Commentary
GOLD / SILVER
While early action today has produced a slight reversal of yesterday’s very bearish outside market forces of rising rates and a strengthening dollar, gold and silver are likely to remain under a constant cloud of potential liquidation because of outside market forces. In fact, despite very strong market expectations of a Fed pause (93% Fed funds watch tool), market rates have continued to rise. While it is possible the world is beginning to downgrade the value of US treasuries because of expanding US credit risk due to a brewing debt ceiling/government shutdown battle, it is also possible that long rates are simply making a historic readjustment. In conclusion, gold and silver prices are destined for significant volatility as US interest rates seek fair value which in turn should propel the dollar higher.
PLATINUM / PALLADIUM
Despite some very bullish overnight press coverage, platinum prices have extended this week’s washout. A report from the World Platinum Investment Council indicates platinum will likely see the largest ever annual supply deficit this year because global supply has held steady versus a strong increase in total platinum demand for 2023. The World Platinum Investment Council projects the deficit to be more than 1 million ounces but the Council did not expect to see supply contract significantly because of unending electrical supply issues in South Africa. In conclusion, the platinum trade is focused on near term forces of economic slowing, rising rates, adequate in position supplies and persistent chart damage.
COPPER
The fundamental bias in copper remains down while the technical picture offers credible support just under the $3.80 level. However, the bear camp should be emboldened by a large 3000-ton single day inflow to LME copper warehouse stocks and more importantly by reports that China intends to complete shipping out copper stockpiled in the Congo as that could result in softer Chinese copper imports in their next monthly trade report. In a fresh and very negative demand signal, German factory data fell precipitously (more than twice expected) rekindling European copper demand fears. Fortunately for the bull camp, speculative positioning in copper as of early last week was already very bearish and given the slide in prices since the report was measured, copper may be nearing one of the largest net shorts in 12 months.
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