GOLD & SILVER
With a Reuters article overnight indicating the treasury markets have thrown over the battle with inflation for a battle with disinflation highlights a bearish environment for gold and silver. Therefore, we think the bull camp will continue to fight an uphill battle with the dollar showing signs of forging more contract highs, bigger and faster rate hike chatter flowing daily, and sagging investment interest verified by outflows from ETF holdings. In retrospect, gold and silver were on the wrong side of the inflation story over the past 4 months with the trade remaining largely convinced inflation would ultimately be controlled.
PALLADIUM & PLATINUM
While the most recent COT positioning report did not show a record spec and fund short position in palladium, the positioning was very near a record and therefore some of last Friday’s rally was likely generated by stop loss buying. Palladium positioning in the Commitments of Traders for the week ending July 5th showed Managed Money traders are net short 2,378 contracts after net buying 291 contracts. Non-Commercial & Non-Reportable traders reduced their net short position by 337 contracts to a net short 4,104 contracts. With global economic conditions still highly vulnerable, and very little evidence showing Russian PGM supplies are being blocked we are highly suspicious of the $400 rally off the early June lows! It should be noted that outflows from platinum ETFs have also picked up pace despite what some saw as good value at last week’s lows.
With the September copper contract into the close last Friday sitting $0.25 above last week’s lows and reports of infection problems in China that should leave the bear camp with control today. In fact, as testing results in Shanghai flow in, talk of significant copper demand destruction are likely to populate the headlines again. However, the copper market should see support from news that Peruvian copper production in May declined by 11% versus year ago levels especially with Chile pegging its May copper production to be down by 2.5% from your ago levels.
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