GOLD / SILVER
Even though August gold has recovered from a fresh low for the move overnight, the charts generally favor the bear camp. According to some press outlets, gold is higher this morning because of a retrenchment in the dollar, but that retrenchment is insignificant early on with dollar charts retaining a bullish set up. However, the parties to the debt ceiling negotiations appear to be so confident in their ability to strike a deal next week, that the President and Congress are leaving Washington for the holidays! In the end, if the dollar has rallied several weeks off the fear of a default and a deal is forming, the dollar bulls and gold bears will have a significant test of their capacity early next week. On the other hand, the pendulum regarding the Fed’s next rate decision (next week) has moved slightly in favor of a hike following a stubborn US PCE reading and somewhat positive US jobs news. Regardless of the Fed’s stance next week, gold and silver this week faced the highest US treasury yields since March 9th and we suspect Treasury markets are also poised to shift trend action next week. We suspect precious metal and many other physical commodity markets are experiencing selling in the wake of credible evidence of a minimal flare in Chinese Covid infections.
PLATINUM / PALLADIUM
As in other precious metal markets and many physical commodities markets, the platinum market liquidation wave might be poised to pause. Furthermore, several major financial market issues will come to a head next week and without a technical default or a US rate hike we expect a short covering bounce in platinum. Obviously, fears of slower demand from China from fresh Covid infections played a major role in the current selloff. In the last COT positioning report the platinum market held a net spec and fund long of 31,134 contracts, which was near the highs of the last 2 years. However, we see platinum as oversold from a short-term technical perspective and we could see several negative fundamental influences peak next week. With the palladium market also holding up impressively in the face of large declines in gold, silver, and platinum yesterday the $1,400 level is given added credence as a value zone. Furthermore, the latest COT spec and fund position in palladium was short 5,311 contracts which has probably limited stop loss selling and put the market near a sold-out condition. As indicated in other precious metal market coverage today a series of bearish fundamentals appear to be factored into prices and with a series of key fundamental events next week palladium is positioned to make a key low.
With the Chinese infection wave out in the open despite government attempts to squash the news, a large weekly decline in Shanghai copper warehouse stocks, less concern for a US default and mostly better than expected US scheduled data yesterday, the rally this morning is justified by several fundamental arguments. Furthermore, the copper market was significantly oversold from classic short-term technical measures and the net spec and fund short (adjusted into the low on Wednesday) likely registered a net spec and fund short near the largest levels since March 2020! However, LME copper warehouse stocks posted a 25th consecutive day of inflows today but that negative news was partially offset by another noted decline in weekly Shanghai copper stocks.
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