PGM Markets May Get Lift

PLATINUM / PALLADIUM

While it appears October platinum has found value at the $900 level and is potentially capable of building a consolidation low support shelf at that level, outside market pressures are likely to remain in place through this morning’s US monthly jobs report release. While not a definitive bottoming force, seeing the Chinese Premier promise to spare no time to boost the Chinese economy, it is possible that the PGM markets could see a lift next week from yet another Chinese stimulus/support program. In retrospect, favorable US vehicle sales this week and improved views on the status of the overall US economy should add modest support for platinum prices, but Chinese economic growth is the real prescription for reversing sentiment in the market in favor of the bull camp. Unfortunately for the bull camp, the threat of higher US interest rates is front and center this morning from the US payroll report release and with a positive number, a retest of areas just below $900 is likely.

GOLD / SILVER

The path of least resistance in gold and silver remains down with the fear of higher interest rates front and center and dominating over the influence of the dollar. Fortunately for the bull camp, the dollar action has been nondescript if not somewhat weaker following yesterday’s initial upside breakout, but with major monthly US jobs data directly ahead, the subject of higher US rates sits in the windshield. However, the bull camp might have absorbed some of the increased rate hike prospects following the very strong ADP reading yesterday and that in turn could set a somewhat higher bar for this morning’s official nonfarm report gain. Unfortunately for the bull camp gold ETF holdings declined for 14th straight session yesterday and are now down 1.6% year-to-date. Silver also continues to see outflows with 1.4 million ounces exiting yesterday bringing the year-to-date decline to 0.6%. Today we think the bear camp is likely to benefit from another macroeconomic chain of events with a solid US payroll reading report sparking another jump in US rate hike fears which in turn should lift the dollar and ultimately ignite gold and silver selling. While US jobs reports like ADP, Challenger, Paychex, job openings and labor turnover do not correlate tightly with the official US government non-farm payroll reading, yesterday’s very impressive ADP jobs reading of +497,000 signals the potential for US recession fear to end or at least shift market sentiment to less concerning soft-landing fear.

COPPER

Fortunately for the bull camp in copper, the Chinese Premier overnight promised to spare no time in reviving the Chinese economy as a 6300-ton jump in weekly Shanghai copper stocks rekindles doubt on Chinese copper demand recovery. In fact, other markets like iron ore saw chatter hopeful of added Chinese economic support but that optimism was tempered by a prediction by an Asian economist that China was unlikely to deliver a “Big Bang” infrastructure targeted package. In a negative signal of the status of the Chinese economy, of the 7 weekly Shanghai exchange commodity stockpile readings, only 2 markets (zinc and nickel) showed declines with copper, aluminum, lead, Tin, and natural rubber increasing on the week. Furthermore, fear of softening Chinese copper consumption has been facilitated all week long following disappointing Chinese PMI data, renewed concerns of collapse in the Chinese property development sector and from escalating retaliatory trade restrictions flowing from both Chinese and US officials. Not surprisingly, the copper market forged a new low for the move yesterday in the face of definitive risk off vibes flowing from global equity markets and that same influence remains in place today. The bull camp should be very discouraged as prices have declined in the face of evidence of lower South American copper production.

Interested in more futures markets?  Explore our Market Dashboards here.