GOLD / SILVER
While the gold and silver markets are receiving a small measure of lift this morning from weakness in the dollar, a bearish bias lingers in the marketplace. With a relatively thin US economic report slate today, the primary focus of the gold and silver trade is likely to be three Fed speeches with particular focus on the Fed Chairman speech. Even though the debt ceiling issue remains the primary focal point of most markets, with Biden outside the country we doubt he will allow progress to be made without his presence. On the other hand, a growing chorus of Democrats are supporting a move to use the 14th amendment to circumvent Congress under the guise of protecting the solvency of the United States and that nuclear option will likely be a hot topic on Sunday. Since May 10th, gold has lost nearly $80 in value, while silver has lost more than $2.00 in value with both markets reaching their lowest levels since late March. Not surprisingly, gold, and silver ETF holdings this week have declined in sync with futures prices, but we now feel the risk of fresh shorts is on the rise! Clearly, declines in gold and silver prices this week have been the result of declining flight to quality interest from “hope” of a debt ceiling deal, but that outcome is far from certain.
PLATINUM / PALLADIUM
The PGM sector has also been weighed down by the Dollar’s rally this month as palladium and platinum both finished Thursday with sizable loss. With prices for both new and used vehicles remaining at high levels and the prospect of higher US car loan rates, demand for new US cars and trucks is likely to slump. However, there has been a surge in US light vehicle sales which reached their highest reading since mid-2021 in April. Dealer inventories have risen since the start of this year but remain close to historic lows. As a result, US vehicle production could see a moderate increase over the next few months, which could provide underlying support to both PGM metals due to increased auto catalyst demand. Yesterday platinum ETF holdings fell by a minimal 656 ounces and into the last trading session of the week holdings are up 9.7% year-to-date. The path of least resistance is down in palladium with unreliable support early today seen at $1448.50, with the market drafting only minimal support from a 1269 ounces inflow to palladium ETF holdings yesterday.
Fortunately for the bull camp the copper market saw another significant weekly outflow of copper from Shanghai copper warehouse stocks. In fact, weekly Shanghai copper warehouse stocks have declined for 12 straight weeks which largely offsets 19 straight days of inflows to LME copper warehouse stocks. While the net change in global exchange copper warehouse stocks over the past 2 months is a slight increase, evidence that Chinese industrial inventories of copper contracted this week, combined with the Shanghai stock decline of 15,872 ounces leaves the supply condition in copper minimally supportive today. However, talk of oversupply of nickel and zinc ahead creates bearish headwinds for copper prices today, but that news is offset by weekly declines in Shanghai aluminum and lead supplies. While some of the weakness in copper prices on Thursday was a simple balancing of yesterday’s overdone rally, manufacturing data from the US Fed this week certainly sparks concerns of softer US copper demand ahead.
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