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PGM Markets Off New Lows


In addition to a lack of classic bullish fundamental themes, gold and silver have seen sellers emerge off a rekindling of US rate hike prospects given yesterday’s very positive sweep of US scheduled data in the form of durable goods and new-home sales. Adding into the bearish tilt this morning is a wave of hawkish commentary from a European central bank forum in Portugal where a long list of central bank leaders have echoed the need to “fight inflation” with further rate hikes. Not surprisingly, investors remain negative toward gold with gold ETF holdings yesterday declining for a 7th straight session leaving total gold holdings down nearly 1% year-to-date.

Palladium bar


In retrospect, promises of additional stimulus programs earlier this week from the Chinese Premier have failed to spark bargain-hunting buying in PGM markets which fresh off new lows for the move this morning. Furthermore, PGM markets failed to benefit from very upbeat US scheduled data yesterday and failed despite a measure of “risk on” flowing from US equities. In other words, the bull camp in platinum and palladium are not easily pulled in on the long side. While the concerns of a political meltdown in Russia have moderated from earlier in the week, it should be noted that the PGM markets completely shrugged off the potential of a debacle in the world’s largest PGM producing country. Surprisingly, both platinum and palladium ETF holdings saw inflows yesterday of 4,587 ounces and 1,011 ounces respectively, with platinum holdings now up 5.5% year-to-date and palladium holdings up 15% year-to-date.


In retrospect, this week’s pattern of lower lows is patently discouraging to the bull camp as China offered another stimulus effort, US data was surprisingly good yesterday and LME copper warehouse stocks have continued to fall. Unfortunately for the bull camp overnight news of an 18.8% decline in Chinese corporate profits (among industrial companies) in the first 5 months of this year has further punctured any residual optimism from two Chinese stimulus offers and a series of interest rate reductions. In fact, copper prices have forged a 10 day low this morning despite an ongoing loss of production from the world’s largest copper producer in Chile from flooding.


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