GOLD & SILVER
The path of least resistance remains down despite the massive short-term oversold technical condition in gold. Unfortunately for the bull camp, the dollar remains near contract highs with the currency trade viewing the dollar as an ongoing dominating force. Not surprisingly, the release of the Fed June 14/15th meeting minutes provided fresh hawkish/bearish gold dialogue as the committee discussed the potential for even more restrictive policies to bring inflation under control. Even though gold failed to rally in sync with rising inflation expectations (peaking in March of this year), it is entirely possible that gold will now see additional pressure from deflationary fears arising from widely held recession expectations.
PALLADIUM & PLATINUM
Despite a price forecast reduction for palladium from Bank of America, the palladium market continues to grind higher. Recent gains have also been carved out in the face of broad-based sagging commodity demand prospects and an ongoing nearly total lack of interest in palladium ETF holdings. While the threat against supply from Russia and South Africa have not been key features of the trade, we suspect those issues are contributing to the grind higher in palladium prices. Unlike palladium, platinum has rushed to factor in a plummeting of demand in the event of recession. Platinum should be undermined because of softness in recent US vehicle sales and should be under pressure because of ongoing significant outflows from platinum ETF holdings.
Not surprisingly, analysts have revised their copper price forecasts for this year downward in a sign that sentiment in the copper market is embracing recession as inevitable. However, the potential for a deep recession should not be ruled out if near-term US price measures remain hot and or the mass testing in Shanghai results in a lockdown of the world’s 3rd largest city again. Even though the trade will likely react to upcoming US jobs news, the overwhelming force in the copper trade will rotate between the Shanghai infection situation and the big picture macroeconomic vibe flowing from financial futures.
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