Despite favorable Chinese industrial production and retail sales readings overnight and talk of benefits from Chinese stimulus efforts, copper has posted a fresh new low for the move. Big picture global macroeconomic conditions also favor the bear camp in copper, especially given the potential for China to announce additional lockdowns without warning. In another minor negative, this week’s Shanghai copper warehouse stocks decline was minuscule, thereby failing to rekindle supply concerns inside the country. As if the bear camp needed more ammunition, reports from Shanghai predict rising copper scrap supply. Offsetting today’s positive Chinese economic data are reports yesterday of slower Chinese traffic, disappointing US Empire State and Philadelphia Fed manufacturing readings and softening US copper demand views.
GOLD / SILVER
With the dollar index posting a 6-day high overnight, traders should expect new contract highs in the Dollar in the coming sessions even though a lack of critical US economic data today might limit activity in the currency markets. Even with anxiety flowing from weakness in global equity markets and broadening global recession sentiment, gold and silver are not benefiting from economic uncertainty. Fortunately for the bull camp, gold ETF holdings yesterday saw an inflow of 43,587 ounces while silver ETF holdings posted another very significant outflow of 2.3 million ounces. We suspect the silver market is the victim of investors fleeing a physical commodity market facing recession, spillover pressure from gold weakness and adverse currency market action. While the Indian government has reduced the base price of gold imports (which in turn lowers the import duty) Indian buyers remain hesitant buyers looking for even better bargains ahead.
PALLADIUM / PLATINUM
With significant two-sided directionless action in palladium in the first half of September (a trading range of $240) and classic fundamentals virtually nonexistent (daily) palladium is unlikely to establish a trend without a very significant development from Russia or China. From a technical perspective, the early September rally in palladium showed little increase in trading activity and was followed with a decline in open interest. The bearish outlook for the platinum market is more definitive than in palladium with the bear camp confident in the wake of a very definitive “pattern” of investment rushing out of platinum ETF holdings. In fact, platinum ETF holdings yesterday saw another decline of 4,131 ounces pushing total holdings closer to a 13% year-to-date decline.
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