Bear Camp Has the Edge in Platinum

PALLADIUM / PLATINUM

Given the negative divergence in platinum with the gains in gold and damaging chart action, the bear camp has the edge into the 4th trading session of the week. Apparently, the platinum market was not cheered by talk of a peak in Chinese infections perhaps because global recession fears are growing. However, overnight positive news from Tesla and hope for something positive from today’s US GDP has improved overall market sentiment. Unfortunately for the bull camp the improvement in economic psychology and concerns of periodic blackouts in South Africa (the world’s top producer from an outdated electric grid, poor management, and extremely deep mines) have not prevented platinum from forging a 4-day low in the early going today. According to the CEO of Anglo-American Platinum LT,D without a quick solution to the power outages their production this year will likely fall below last year! Furthermore, a 4-day pattern of noted inflows to platinum ETF holdings was aggressively reversed yesterday with an outflow of 7377 ounces. For the most part, the palladium market is uninteresting from a fundamental perspective but is presenting a bearish technical set up. If upbeat platinum demand is unable to support palladium prices, the outlook for palladium demand is miserable unless there is a 180-degree reversal in global economic sentiment.

GOLD / SILVER

While gold and silver prices are lower to start today because of strength in the US dollar, most markets could set their trends for the coming days following today’s 7:30 wave of US scheduled data. Obviously, the initial claims reading will be important considering the downside breakout last week, but overnight sentiment seems to have shifted up off hopes of solid US growth evidence from GDP this morning. In other words, the dollar will be presented with fresh impactful data which we think will fail to provide sustained gains. Therefore, gold and silver could see an early knee-jerk reaction dip from the data flow this morning, but ultimately, we see the bull trend in gold returning. In our opinion, it is possible that gold and silver are beginning to look beyond the final stages of the rate hike cycle and/or there is a growing fear of recession prompting flight to quality buying. While many markets did not show a definitive reaction to favorable Chinese Covid news from the Chinese Center for Disease Control indications that current infections were 72% below their peak, traders are understandably skeptical. However, the Chinese government also indicated that 82% of their population has been infected and that should be seen as building national immunity. In another suspicious bullish development, a major Russian gold producer expects significant Russian government buying of gold ahead.

COPPER

While the copper market yesterday posted a 3rd lower low trade which gives the bear camp a slight technical edge today, there has been an improvement in global sentiment overnight and with an early higher high playing field has been leveled ahead of very important US data. Clearly, the copper market yesterday largely discounted Chinese government reports suggesting the infection rate is 72% below its high-water mark. The market is also discounting Chinese center for Disease Control estimates that over 80% of their population has been infected which in turn should present a window of low infections in the weeks ahead. On the other hand, the trade continues to embrace views that the world supply of copper remains extremely tight even though Shanghai copper warehouse stocks over the last 4 weeks have jumped by 156%. On the other hand, LME daily copper warehouse stocks have retained a very consistent pattern of notable daily outflows, Freeport copper has indicated a lack of manpower is cutting output, lower production is expected from Chile and Goldman Sachs has predicted aluminum prices will rally by 50% as demand outstrips supply. With Goldman Sachs predicting aluminum demand to outstrip supply, that should provide spillover speculative buying in copper.

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