More Losses in Gold & Silver Prices

GOLD / SILVER

Gold and silver prices followed Friday’s breakdown with further notable losses this morning off dollar strength. Therefore, both markets damaged their charts and are likely to set back to consolidation support at recent consolidation lows of $1,950 in August gold and at $23.00 in July silver. On the one hand, Chinese trade desks are suggesting buyers there are waiting on the premium and/or flat prices to cheapen before becoming buyers, but that should be offset by a move by the Indian government to reduce the gold import price basis for taxation. We would note that Indian buyers have also shown price sensitivity, and perhaps it will take a setback in gold and silver to consolidation support to get buyers in the world’s two largest consuming countries to turn buyers. While the gold market held an average spec and fund long as of early last week, in this morning’s action, August gold is $20 below the level where positioning was measured, and therefore the market is probably close to a “mostly liquidated or balanced” positioning. While silver held up relatively better than gold in the late washout last Friday and its chart are not severely damaged, silver might be able to avoid being dragged down by outside market action in Bonds, the Dollar and even gold. However, July silver is less overbought than gold and might find balance on a modest break.

PLATINUM / PALLADIUM

The platinum market finished last week under pressure but has close-in support on the charts at $997.40. Fortunately for the bull camp, platinum ETF inflows have continued to build despite seeing outflows in other precious metals markets. The $1,000 level might offer psychological support, but the most recent net spec and fund long might leave the market vulnerable to further liquidation. However, the last economic report from China and US jobs figures last Friday are viewed as slightly supportive of platinum demand this morning. Like the rest of the metals markets, the palladium market faces residual outside market pressure from last week and a retest of consolidation support at $1,386 and perhaps down at the recent low of $1,351 if global economic sentiment becomes significant risk-off. Fortunately for the bull camp, palladium is significantly oversold in the spec categories with the net short approaching the record net spec and fund short.

COPPER

While the copper market has been one of the strongest commodity markets over the last week, (which is surprising considering that recent official Chinese manufacturing PMI readings were disappointing) but were apparently fully offset by a strong private Manufacturing PMI result. The copper market is also supported by the overnight release of a Chinese Caixin Services PMI reading for May. Furthermore, the outlook for the US economy has been boosted slightly but not so much to foster concerns of Fed action as odds from surveys suggest only a 30% probability that the US Fed will hike rates next week. There are also whispers from Chinese analysts suggesting that beyond targeted stimulus for parts of the economy, there could be broad stimulus action like reducing interest rates. Unfortunately for the bull camp the latest weekly Shanghai copper stocks report showed almost no change after a long string of weekly drawdowns.

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