Written Commentary
GOLD / SILVER
While the precious metal markets are likely overbought from significant gains earlier in the week, and due some corrective action, we blame big picture risk off psychology. Not only has the tensions between Russia and the rest of the world undermined sentiment, but US corporate earnings seem to have lost their ability to lift equities and highflying crude oil prices have corrected sharply. In short, the gold and silver markets are behaving like classic physical commodities fearful of a tempering of physical demand and are certainly experiencing back and fill action.
PALLADIUM / PLATINUM
Unlike gold and silver, the palladium market has a distinct bullish fundamental theme in the form of the Russian threat of aggression and a potential obstruction of PGM supply. By some measures, Russia produces more than 40% of the world’s palladium with a net output north of 91 metric tonnes. Not to be left out, the platinum market has joined palladium in its march higher off the importance of Russia in the world’s supply of platinum. However, with Russian platinum production at 20 metric tonnes, it is not one of the primary supply sources for the world, but it is important.
COPPER
Given that we were skeptical of the copper recovery from the Tuesday low we are not surprised in the corrective setback to start today. Adding into the shift from bullish to bearish from soft US data are builds in both LME and Shanghai copper warehouse stocks. The 4,772 ton increase in Shanghai copper stocks is particularly discouraging for the bull camp as that insinuates a lack of copper demand in China.
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