GOLD / SILVER
Gold was weaker overnight, and the market seemed to be willing to press Friday’s lows coming into the session this morning. With the path of least resistance in interest rates and the dollar pointing upward, the path of least resistance in gold and silver remains down. The fear of a jumbo (75-basis point) US interest rate hike on Wednesday has been factored consistently since the previous FOMC meeting, and we suspect the trade is pricing in expectations of the Fed opening the door to the next rate hike. Friday’s COT report showed a minimal decline in the fund net long position, but since the report was measured, gold has declined $50, which suggest net short may have grown to its largest since mid-2019. On the other hand, even with a moderately oversold technical position, the bull camp lacks a credible argument for the market putting in a low. The silver market on the other hand has recently posted a spec and fund net short position and has shown periodic divergence with gold. With silver falling 50 cents since the COT data was collected, it likely enters the week with a spec and fund short net short.
PALLADIUM / PLATINUM
With a range down failure at the end of last week, the palladium market appears to be drifting back toward consolidation low support, which begins at $2,050 and becomes very critical at $2,000. Like gold and silver, palladium lacks classic bullish fundamentals, with global slowing/recession fears likely to hang around the headlines through the interest rate decision on Wednesday. Unless the Fed makes a confidence-building statement on the US economy or gives hope of slowing the jumbo rate hikes, periodic failures below $2,000 are likely in the week ahead. On the other hand, Friday’s Commitments of Traders report showed palladium had a minimal spec and fund net short, and aggressive selling ahead could put the market back near record net short territory. The platinum market continues to suffer much larger liquidation of ETF holdings than palladium, with investors likely exiting because of the rate hike expectations. Softening global demand and the lack of a discernible blockage of Russian supply leaves platinum in a neutral to negative posture.
The copper market was lower overnight and in a precarious position, especially with critical economic news scheduled on Wednesday. While it is folly to predict Covid patterns in China, that nation has moved very quickly to minimal case count readings, and that could serve to keep further restrictions at bay. Last week’s news suggested a slight moderation of restrictions was allowed in a single city. The trade has generally been expecting yet another stimulus program, too. With the Friday’s Commitments of Traders report showing a moderate spec and fund net short and copper having declined $0.13 since the data was collected, weak-handed longs should have been pushed to the sidelines. However, threats against supply are well-known, and news of the canceling of capital spending for expansion of mining output in Chile should help the market respect psychological support at $3.40.
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