GOLD & SILVER
With the dollar index coiling into a tight consolidation and both gold and silver ETF’s posting outflows in two of the last three trading sessions, the gold bears start the Wednesday trading session with a slight edge. However, news that Hong Kong was removing additional Covid activity restrictions and that inbound travelers to China will not be subject to quarantine in early January provided some modest speculative buying again overnight. At present the gold and silver trade is being cushioned by hopes for lower US inflation which in turn might reduce the upward track in interest rates. With the dollar bound in a tightening/coiling range a major currency market impact on gold and silver prices should be expected at some point soon.
PALLADIUM & PLATINUM
The gap higher in March palladium on Tuesday supports ideas that the market put in a major low last week. Softer than expected US economic data on Tuesday coupled with a slowdown in PCE gains last week suggest the US Fed is making progress on its inflation fight and raises hopes that interest rate increases will slow. Perhaps more important to PGM demand is the news that China is further relaxing its Covid restrictions, as that could boost auto consumption and therefore demand for auto catalysts like palladium and platinum.
While the copper market might have overreacted to the latest lessening of Chinese Covid rules, seeing the Chinese choose growth over the spread of Covid could be very positive in the “long term”. However, with infections rising, hospitalizations and funeral homes reported to be extremely busy, the impact of further opening could bring near term anxiety selling. However, Chinese November copper output increased by 10.3%, Bloomberg overnight indicated “slumping movement in key cities” which could lead to declining car and home sales might.
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