GOLD & SILVER
The bull camp should be disappointed with the initial action in gold and silver today given a fresh new low for the move in the dollar. Unfortunately for the bull camp, disinvestment in precious metal ETF instruments remains definitive with gold outflows last week reaching 230,000 ounces and silver outflows reaching a very significant 17.6 million ounces. However, in our opinion the rally in gold from the July spike low is only partly the result of currency issues and is likely seeing speculative buying given the “passing” of the US jumbo rate hike. However, Indian, and Chinese demand has been proven to be very soft with the World Gold Council last week producing a double-digit percentage Chinese gold demand contraction in the first half.
PALLADIUM & PLATINUM
The PGM markets continue to present uniformly bullish charts with higher lows and higher highs settling into a pattern. Unfortunately for the bull camp, platinum continues to see significant outflows from platinum ETF holdings highlighting a lack of investor interest. Disinvestment in PGM ETF holdings continued last week with the net platinum outflow 23,377 ounces and palladium ETF holdings reduced by 3554 ounces. Platinum ETF holdings are now down 11% year-to-date, while palladium ETF holdings are down 13% year-to-date. As in platinum, the bias in palladium is up with the markets seeing significant Chinese PGM imports as a positive instead of a negative.
While copper prices have not forged a higher high in the early going today, prices are holding near last week’s high and the $3.60 level despite disappointing Chinese manufacturing data. In fact, 2 of 3 Chinese PMI readings were softer than expected at the same time Europe presented a wave of disappointing manufacturing PMI results. As in many physical commodities markets, the copper market is relieved with the passing of the latest US rate hike. However, Shanghai copper stocks continue to fall with stocks at the exchange near critically low levels of 34,000 tons. It is also likely that word of local Chinese governments preparing infrastructure programs are serving to attract fresh buying interest into copper.
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