GOLD & SILVER
While the gold market has managed some positive early action today the gains are minimal and appear to be a simple technical pause before prices continue downward motion. With three straight days of aggressive range up action in the dollar and several weeks of higher yields in US treasuries, the downside extension in gold and silver yesterday was fully justified. Clearly, recent very upbeat gold jewelry/import figures from China and India are being heavily discounted with the trade instead relying on big-picture macroeconomic outside market influences for direction.
PALLADIUM & PLATINUM
Like gold and silver, the PGM markets are higher today in what is likely a simple technical bounce. With a massive washout in September palladium to the lowest level since July 22nd and the market falling through several critical retracement support levels (from the July and early August rally) the bull camp should be severely deflated. Investment demand for palladium remains very soft with palladium ETF holdings at a year-to-date decline of 15%! We suspect both palladium and platinum are undermined by fear of reduced demand for vehicles in the face of signs of slowing and sharply reduced disposable incomes from food and energy inflation.
Apparently scorching heat in China has resulted in a reduction of metals output with cash premiums firming and copper stockpiles drawing down. In other words, a reduction in supply is for the time being matching and perhaps slightly overcoming soft demand conditions inside China. The copper market was fortunate to have respected consolidation support at $3.60 yesterday given widespread recession concern, a sharply higher US dollar and the potential for China to reduce industrial output further because of the need for power for significant cooling in blistering hot portions of Southwest China.
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