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Fear of Recession, Rising Rates Bearish


The gold and silver markets like many other commodities are falling victim to escalating fear of global recession this morning. It is also likely that a minimal higher high in the dollar is providing added selling incentive. Yet another moderately negative overnight development is a 16th straight day of gold ETF outflows, with the overnight outflow 209,720 ounces a very significant reading. Even more negative to the precious metal markets is a massive 8.3 million ounces outflow from silver ETF holdings, with that outflow pushing total silver ETF holdings down 8.1% year-to-date. Futures are likely to advance from current levels today now that the ECB interest rate hike is out of the  way.


While the palladium market remains within recent consolidation pricing, the platinum market has forged a moderate failure on its charts and both markets should be pulled lower by a resumption of global recession fear. However, it remains extremely difficult to define the focus of the PGM trade as fundamental news flow has dried up, and the markets have no fear of disrupted supply from the world’s largest PGM producer. Furthermore, demand signals from the auto sector are delayed significantly and we suspect large auto manufacturers have piled in strategic PGM supply following the explosion in prices in the first quarter.


With the copper market yesterday posting a gain off last week’s low of $0.24, big picture macroeconomic sentiment very negative, signs of a strengthening dollar and generally disappointing US data from the housing sector, the bear camp has plenty of ammunition today. Supportive overnight news included a jump in June Chinese refined copper output of 10.3% and a decline in LME copper warehouse stocks of 2025 tons.

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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