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Corrective Action in Gold


Obviously gold and silver were short-term technically overdone following yesterday’s explosive follow-through rallies and therefore a measure of corrective action early today is not surprising. Furthermore, a bounce in the dollar and signs that Congress might be laying the groundwork for a temporary extension of US funding and possibly reducing the amount of stimulus, is justification to remove some of the premium gained this week.


With another new high for the move in April platinum yesterday and weakness in the palladium market, it-would-appear that the long platinum/short palladium spread is back in vogue. From a technical perspective, the rally in platinum continues to be accompanied by a rise open interest (the highest since March) and it is possible that the strong price action in gold and very dovish global central bank dialogue this week is bringing in fresh capital to the platinum market.


While the copper market has rallied $0.14 from this week’s lows into this morning’s highs, the rally is justified by a-number-of fundamental developments. In addition to a sweep of notable daily LME copper warehouse stock declines this week, the Shanghai copper stocks also fell by 7,870 tons leaving total global copper exchange stocks near 7-year lows! We also suspect copper saw buying off projections from Goldman of the beginning of a commodity super cycle, but also because of unrelenting new highs in coal and iron ore prices in China.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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