GOLD / SILVER
Despite slightly supportive early dollar action both gold and silver are tracking lower perhaps because of concern for the ECB rate decision early today. The action in the gold and silver markets yesterday should be extremely discouraging for the bull camp as the markets dodged what appeared to be a very hot headline US CPI reading without rekindling fear of a US rate hike next week. Apparently, the trade and economists reasoned that the excluding food and energy component slowing versus year ago levels would allow the Fed to hold steady in their September 20th meeting. However, yesterday’s reports should have resulted in a sharply lower dollar and a noted drop in US treasury yields. Unfortunately for the bull camp, treasury yields only posted minimal declines, but given a jump in dollar index trading volume and a rise in open interest, the bullish vibe toward the dollar remains in place. A fresh negative demand development overnight is news that yesterday gold ETF holdings declined by a significant 123,648 ounces which market the 9th straight daily outflow.
PLATINUM / PALLADIUM
Fortunately for the bull camp, the platinum market has found some value on the charts. On the other hand, the platinum market has had very little in the way of fresh bullish demand news and has not seen fresh headlines pointing to reduced production from South Africa for the last 8 days. In fact, without a significant improvement in economic views toward China, we suspect platinum will be pinned to the $900 level with the bottom of the anticipated trading range at $890. With the upside breakout in palladium yesterday not linked to a specific fundamental development, we suspect a portion of a “record” net spec and fund short has decided to bank profits and exit.
With the December copper contract managing a 6 day high early today a pattern of higher highs and higher lows is developing. However, the ultimate direction of copper will continue to be dictated by Chinese real estate news and or any other Chinese stimulus announcements. Certainly, copper will also be impacted by the ebb and flow of risk-on and risk-off sentiment and therefore for copper to avoid late in the week selling the market needs positive vibes from equity markets. With LME copper warehouse stocks up 6 sessions in a row, posting increases in 38 of the past 43 days and LME copper stocks close to a 2 year high, the minimal 25-ton decline overnight is inconsequential. Like other physical commodity markets, the copper market is relieved with the passage of the US CPI report but the market will also need to traverse today’s ECB rate decision and US initial claims to continue the developing uptrend pattern on the charts.
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