Negative Chart Action for Gold & Silver

GOLD / SILVER

Both gold and silver posted negative chart action overnight perhaps from news that Chinese net gold imports through Hong Kong last month declined by 50% from the previous month. Clearly, gold, and silver are seeing negative influences from rising US rate signals from futures markets, and to a lesser degree from anemic Chinese economic data. The markets in general were “let down” following the Chinese Congress meeting which failed to promote fresh stimulus package for the struggling Chinese economy. However, the new Chinese premier is expected to offer fresh stimulus initiatives to counter headwinds from China’s ongoing zero Covid policy. Initial readings on Indian gold demand ahead of their impending festivals are disappointing for the bull camp. Fortunately for the bull camp, the US Federal Reserve has entered its blackout period ahead of the next FOMC meeting and therefore the latest view toward future Fed rate hikes could remain more dovish than hawkish. In retrospect, gold and silver saw almost no flight to quality reaction to accusations by both Russia and the Ukraine that the other side was preparing a dirty bomb attack.  With last Thursday showing significant gold trading volume of 114,313 contracts on a big range up reversal and poor close trading session, it is possible that gold forged an interim technical high last week. The silver market on the other hand saw huge trading volume on Friday on the major range up extension move, thereby signaling the charts in silver are supportive and are diverging with gold.

PALLADIUM / PLATINUM

While we see the upcoming trend in palladium as nondescript, the charts have shifted bearish with the markets beginning to test the bottom of the last 3 months consolidation at $1,950 in 4 of the last 5 trading sessions. Yesterday palladium ETF holdings were barely changed with a decline of 2 ounces leaving the year-to-date contraction at 18%. From a macroeconomic perspective, we see the Chinese economic condition as bearish to auto catalyst feedstock demand hopes especially after Tesla moved to reduce in prices for its vehicles inside China. In a negative development yesterday platinum ETF holdings declined by 2,799 ounces and are 14% lower year-to-date. Obviously, critical support in December palladium is $1,951 and then again down at $1,943. Resistance in January platinum is $950, and support pricing is pegged at $913.60.

COPPER

Apparently, the bear camp has the edge in today’s action as copper prices failed to garner support from overnight speculation that China might increase its purchases of Russian supply next year to offset or mitigate surging premium increases from other global mining entities. As indicated in other coverage this morning, the Chinese party Congress meeting adjourned without a specific stimulus announcement and that could be part of the reason for copper’s lower track this week. Copper prices should draft support from confirmation that copper available for immediate delivery against LME contracts has declined to the lowest level since April 8th with 3rd straight daily decline. In another supportive development, the CEO of Codelco indicated that they see Chinese copper demand resilient going forward. The Codelco view of Chinese demand is important with the company indicating that 50% of their production goes to China. Recent Chinese import data indicates the country is showing preference for less polluting forms of copper supply. The markets are concerned about a slowing of supply from the Congo from port strikes and Congo supply is especially important to China who secures 13.7% of its imports from the African nation.

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