Written Commentary
GOLD & SILVER
While the declines in gold in the 2nd half of June were not significant, they have been consistent and given fundamental conditions more declines are likely. In fact, given a fresh higher high in the dollar again this morning August gold appears destined to test the next key support level down at $1808.40. In retrospect, we are surprised gold and silver prices yesterday were not under more intense pressure following Fed dialogue raising the probability of more aggressive rate hikes “upfront” in the proposed tightening cycle.
PALLADIUM & PLATINUM
Even though news and trade talk from the palladium market have not verified the source of the aggressive rally in palladium this week the most logical cause is rising threats against South African PGM production. In fact, we are hard-pressed to find any other fundamental developments capable of pushing palladium prices up by more than $100 within a single session, especially without significant outside market involvement. With the state electric generating company (Eskom) forced to implement the largest power cuts in 2 years, traders should fear a loss of PGM production. Unfortunately for the bull camp in platinum, speculators and investors are not as interested in the metal as palladium even with palladium in strong favor.
COPPER
While we were somewhat impressed with copper’s ability to reject initial selling yesterday, (especially in the face of a series of classic bearish fundamental developments) the bias remains down. Clearly, the copper market fears a slow recovery in China will keep copper demand limited, especially after Chinese manufacturing PMI for June failed to improve as much as expected. A slight countering of the soft manufacturing PMI concern from China came from a much better than expected Chinese nonmanufacturing PMI reading for June.
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