July copper has extended the recovery from last week and can make a 7-day high if US scheduled data presents a positive US economic outlook. However, positive US scheduled data is a double-edged sword with a portion of the markets seeing positive data as a sign the US Fed will not pause its rate hike cycle. Unfortunately for the bull camp the LME copper warehouse stocks pattern breaking daily outflow was possibly a one-off development with LME copper warehouse stocks yesterday rising by a very minimal amount. The trade should be emboldened by a private Caixin Chinese manufacturing PMI reading overnight.
GOLD / SILVER
While the dollar action overnight is not patently negative to gold and silver, the charts in the dollar show no signs of vulnerability thereby leaving gold and silver under currency related pressure. In retrospect, gold and silver have seen some flight to quality liquidation following the quick House passage of its debt ceiling bill and further but even less significant flight to quality liquidation might be seen when the bill passes the Senate. A limiting force for the markets going forward are several Fed comments yesterday favoring a rate hike in the next meeting but there were two Fed members who indicated they could favor a pause to give the Fed additional data before acting. However, the Fed’s Beige book released yesterday afternoon showed employment remaining strong but at a slower growth pace in all districts, but the report also indicated consumer prices continue to rise which pushes the market pendulum toward a rate hike. In a negative demand signal, Swiss gold exports in April fell to their lowest levels since last June with traders indicating demand for gold softened significantly because of high prices. Traders are awaiting the monthly jobs data on Friday and the weekly jobless claims today, and strong numbers could boost the case for another Fed rate hike in June, which would be bearish for the metals. Recent violence at a Chinese-owned gold mine in Colombia raises minimal supply concerns and could be a problem if it escalates. In a negative investment related development PIMCO has indicated bullion is “modestly overvalued” compared with other inflation instruments like inflation enhanced government bonds.
PLATINUM / PALLADIUM
While the platinum market has failed at the $1000 level in each of the prior 2 trading sessions the market has managed to recoil and is attempting to build consolidation on the charts at that level. Fortunately for the bull camp yesterday platinum ETF holdings saw an inflow of 1095 ounces but failed to move the needle on the year-to-date holdings notably. The platinum market is under fundamental pressure because of a bearish supply forecast from a major Russian PGM producer. The Russian mining company Nornickel is forecasting a 300,000-ounce palladium surplus in 2024, up from a deficit of 200,000 in 2023 due to recycling outpacing demand recovery. Nornickel accounts for 40% of global primary production and has not been directly targeted by sanctions. However, the company also forecasted demand for the metal to increase 1% in 2023, as the automotive sector gradually recovers from Covid supply-chain shocks. The sector accounts for 80% of global palladium consumption.
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