GOLD / SILVER
Even though the dollar has not posted a higher high for the move yet today, it remains near breakout pricing and should remain a headwind against early gains in gold and silver. However, minimally lower US treasury yields provide a very small measure of week ending short covering activity, but the markets continue to lack a key internal fundamental driving force. In retrospect gold and silver withstood hawkish dialogue from three Fed members this week potentially signaling thinner and more orderly declines ahead. Obviously, higher yields in US treasuries will result in a self-propagating upside extension in the dollar which in turn should rekindle selling pressure in gold and silver. Fortunately for the bull camp in gold and silver, today’s US economic report slate is relatively thin with a US consumer credit reading release in the early afternoon unlikely to drive prices. Unfortunately for the bull camp, gold ETF holdings declined for the fifth straight session with an outflow of 114,268 ounces yesterday. While silver ETF holdings shed only 7411 ounces yesterday, that minimal outflow is a deviation from extremely large outflows over the last week. Taking a step back, the markets this week have encountered a return to expectations that US interest rates will be higher for longer following a hot ISM services prices paid reading and fresh strength from the US jobs market from yesterday’s weekly reports.
PLATINUM / PALLADIUM
While the downside extension in platinum yesterday was not as surprising as the sharp declines seen on Wednesday, the declines this week were forged in the face of an extremely bullish supply and demand forecast from the World Platinum Investment Council. Therefore, further price declines after an extremely tight world platinum market forecast highlight a market devoid of bullish speculative interest. Fortunately for the bull camp, the latest spec long positioning in platinum was already modest and prices since the last positioning report have declined, approaching past respected consolidation support. Unfortunately for the bull camp, the outlook for the Chinese economy remains disappointing and global macro sentiment remains off balance.
The downside extension this morning is deserved as both LME and Shanghai copper stocks increased overnight further tamping down tight supply fears. Residual bearish fundamental developments from yesterday include a massive 23,450 tons single day inflow to LME copper warehouse stocks, a decline in Chinese August copper imports and a surprising 17.7% jump in Peruvian copper production in July from year ago levels. Like many other physical commodities, copper looks to remain under liquidation pressure with fear of more gains in the dollar and higher US interest rates fixed in market sentiment. In a minimal fresh bearish development overnight Commerzbank reduced its copper price forecast from $9,000 per ton to $8,800 per ton basis LME futures. Like the equity markets the copper market is undermined by positive US scheduled data and soft Chinese economic data even though market sentiment heavily expects the Fed to pause hiking rates in their September 20th meeting. Fortunately for the bull camp, the trade saw some good news from China as January through August imports of copper and various copper derivatives improved relative to year ago levels.
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