GOLD & SILVER
With the dollar posting fresh highs overnight and market anxiety moderating, the path of least resistance remains down in gold and silver again today. Not surprisingly, investors continue to shed gold and silver ETF holdings with the year-to-date gain in gold holdings now up only 6% and silver holdings falling 4.1% year-to-date. As if market action was not enough bearish news for gold and silver, Bloomberg overnight pointed out gold’s latest failure to behave like a flight to quality instrument in yesterday’s recession inspired physical commodity market washout. Since gold and silver have not tracked tightly with the ebb and flow of inflationary expectations, today’s ISM services paid reading and the job openings and labor turnover report won’t support gold unless the net take-away is a tempering of fears of unrelenting rate hikes.
PALLADIUM & PLATINUM
The palladium market was one of the very few physical commodity markets able to sidestep the massive broad-based commodity washout yesterday. In fact, the palladium market continues to carve out a uniform bullish uptrend pattern with consistent higher lows, but a lack of higher highs! While the PGM markets have not shown sensitivity to the dual supply threats from Russia and South Africa, we think those issues moderated the negative forces flowing from outside market factors yesterday. Unlike the palladium market, platinum came under wholesale liquidation off spillover selling from physical commodities, a surging dollar, spiraling recession fear and softer demand from the auto sector derived from the 2nd softest monthly light US vehicle sales of the year.
While classic supply and demand fundamentals suggest even more declines in copper ahead, the one-month dive in copper prices of $1.35 suggests to us that the market has factored recession. However, seeing fresh Chinese infection concerns (another massive round of testing is underway in Shanghai) punctures demand expectations of the world’s largest copper consumer and will likely force more longs from positions. On the other hand, with copper seeing big picture macro selling from traders rushing to factor in a global recession, copper prices could be the first to sellout and then bottom.
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