GOLD / SILVER
While gold and silver prices are showing initial strength today the gold market lacks a solid bullish theme. In fact, it appears that gold has become less interested in the prospect of ongoing weakness in the Dollar and with the trade fully expecting a Fed pause today, lift from the Fed later today could be limited and temporary. In fact, Fed watchers expect the Fed chairman press conference to keep inflation expectations anchored after the announcement to leave rates unchanged by presenting a residual hawkish case, so the Fed does not allow inflation mongering a fresh foothold. However, talk overnight that the Chinese central bank will move to reduce medium-term rates should provide a measure of fresh fundamental support. Unfortunately for the bull camp, gold ETF holdings continue to flow out with the Tuesday decline of 9,780 ounces the 11th straight day of declines. Lastly, given the ongoing rallies in global equities, it is possible the stock market is pulling capital away from the gold and silver. Even the technical crowd has turned bearish toward gold suggesting the aggressive rejection of last week’s highs might signal a shift from a sideways consolidation to a lower trade. While silver ETF holdings yesterday fell by a significant 1.5 million ounces and are now 0.6% lower year-to-date, the silver charts remains very bullish with silver definitively showing signs of diverging with gold.
PLATINUM / PALLADIUM
While July platinum might see minimal support at the $975 level, we expect that level to fail with the supportive Chinese developments this week failing to provide support for prices. Adding into the residual fear of slack demand are fears that palladium supply will rise sharply because of recycling. Therefore, the platinum market is facing bearish internal supply and demand conditions with bearish news from the palladium market which should leave the bear camp in platinum in control. Surprisingly, the palladium market has held its ground in the face of predictions that palladium supply next year could rise by 6% after estimates of a 2023 supply will rise in a range of +3% to +6%. The trade is also presented with a prediction that palladium supply from mining will expand because of government approvals of new mining and expansion of current production at existing sites.
The copper market has seen several bullish fundamental forces emerge this week, with the cut in Chinese interest rates combining with talk of intermediate rate Chinese cuts, significant daily declines in LME copper warehouse stocks and a minimal stoppage at a mine in Chile providing a broad bull case. Chinese copper demand expectations were also lifted because of China’s intention to provide targeted support for its beleaguered property sector. Furthermore, the breadth and magnitude of Chinese stimulus efforts is not known yet, but some analysts have suggested upcoming Chinese stimulus will provide economic assistance beyond the property sector. Lastly, bullishness toward copper was so broad-based yesterday that copper mining stocks surged off hopes of recovering physical copper sales to China.
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