PLATINUM / PALLADIUM
Given the initial failure and sharp recovery in platinum futures yesterday, and evidence of net buying of platinum ETF instruments from yesterday there is fundamental and technical underpin for platinum prices above this week’s low of $1,057.50. Furthermore, the bull camp should be emboldened by another inflow to platinum ETF holdings of 1895 ounces yesterday which brings the year-to-date gain up to 9.7%. As of yesterday’s close, the platinum market remained $406 discount to palladium prices! On the opposite side of the argument the palladium market remains at a premium to platinum of $406 and the trade is in the process of factoring a loss of palladium demand to substitution. However, palladium ETF holdings yesterday saw a single day inflow to holdings of 3,591 ounces resulting in a single day expansion of total holdings of 0.7%. Nonetheless, we expect palladium prices to lag PGM market rallies and for palladium prices to lead PGM market declines.
GOLD / SILVER
With a minimal higher high for the move in the dollar overnight, combined with residual hope of ongoing US debt ceiling negotiations, the bear camp in gold has the initial edge. Apparently, the gold trade sees an ultimate solution to the US debt ceiling battle with the odds favoring an increase in the debt ceiling and little if any work on the deficit. Furthermore, gold ETF holdings yesterday declined again this time by 68,837 ounces leaving the year-to-date gain at only 0.2%. With the gold market negatively diverging with silver, platinum, and copper prices yesterday, it appears that strength in the dollar has the full attention of the gold trade. Adding to the negative fundamental bias are signals from some Fed members who patently discounted the potential for Fed rate cuts later this year. In short, the path of least resistance is down in gold. Like the gold market, the silver market freshly damaged its charts again overnight and the fundamental track also favors the bear camp. However, silver should see less spillover selling pressure from dollar gains and should garner a minimal benefit from a modest silver ETF inflow yesterday.
Given the surprise and potentially overdone rally in copper yesterday, slightly negative global economic sentiment and another significant daily inflow to LME copper warehouse stocks, the bear camp has regained control of the copper trade. However, the copper market appeared to benefit from bargain-hunting buying, providing a measure of value in the July contract around the $3.66 level. In fact, Bloomberg overnight has indicated cheap prices earlier in the week appears to have sparked some “stockpiling” of copper from the spot market in China! A potential negative Chinese demand signal overnight came from a 3.5% decline in output of copper rods in the month of April which is the first monthly decline this year. However, with July copper from the last COT positioning report declining $0.25 into the low yesterday the market has likely expanded its net spec and fund short significantly and that could mean short profit-taking combined with bargain-hunting buying around yesterday’s lows. On the other hand, it should be noted that before the aggressive recovery yesterday, July copper posted a 5-month low and extended a lower low and lower high pattern on the charts!
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