Fresh Lower Lows Posted in Gold

GOLD / SILVER

Given the combination of outside market action this morning it is understandable that bullish internal fundamental news in gold has been overridden and fresh lower lows have been posted. While dollar strength is contributing to the pressure in precious metal prices, surging treasury yields have likely become the dominating force for the bear camp. As if the bear camp needed additional ammunition, both gold and silver ETF holdings saw outflows again yesterday, with the gold outflow of 208,081 ounces pushing holdings down to the lowest level since April 29th of 2020. While December gold managed to reject the initial new low for the move washout yesterday, a fresh contract low this morning leaves downside momentum intact. Unfortunately for the bull camp, the Fed’s Harker yesterday indicated that the Fed was intending to slow the economy to stem inflation and that should put hope of classic inflation buying of gold and silver back on the sidelines. In conclusion, global central bankers are all on the same page with respect to raising rates until inflation moderates and that likely sets the stage for fresh contract lows in gold in the coming week. However, the silver market continues to stand up impressively in the face of noted gold weakness and in the face of rising interest rates which in turn might indicate the $18.00 level holds some fundamental value.

PALLADIUM / PLATINUM

While traders yesterday suggested palladium saw buying from hope of a lessening of activity restrictions in China, it is also possible that a wave of shorts was taken out of position following the triggering of profit stops. In retrospect, we see the recovery off this week’s lows in palladium as purely technical in nature or a misguided fundamental reaction. In fact, surging global sovereign bond yields, promises from the Fed that they intend to slow the US economy to kill inflation, ongoing declines in PGM ETF holdings and very little change in supply concerns should discourage paying up for long palladium positions $100 above this week’s lows. While the January platinum contract rose sharply yesterday, the rally did not have an apparent fundamental catalyst and is likely to be given back today. Like palladium and other physical commodities, we see unattractive risk relative to reward from being long physical commodities in the current environment.

COPPER

All things considered, copper’s slight decline in prices this morning is in some ways a victory for the bull camp. In fact, with Shanghai copper warehouse stocks replicating last week’s massive inflow of supply, copper could have posted new lows for the month. In fact, Shanghai copper warehouse stocks in two weeks have jumped by more than 55,000 tons building those supplies back up from extremely tight levels. However, protests in Peru reportedly blocked mining access again and Chinese equity markets managed to post gains in the face of global weakness overnight. On the other hand, overnight reports have Peruvian communities reaching a “truce” to reopen the “Las Bambas Road”. While the December copper contract did forge a lower low yesterday, the market aggressively rejected that move and at times traded $0.13 above the early Thursday low. Therefore, technical signals have shifted slightly in favor of the bull camp, especially when one considers that the last COT positioning report in copper showed a net spec and fund short of 15,595 contracts.

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