PALLADIUM / PLATINUM
Obviously, the platinum market enters the new trading week in a less vulnerable liquidation mode, as global risk off concerns from last week are missing in the early going today. In our opinion, the platinum market last week saw pressure from the deterioration in macroeconomic sentiment and might have seen selling off fears of serious economic problems in China from the infection explosion. While the markets did not fully embrace the idea of a $1 trillion US platinum coin, that prospect has been dashed by comments from the US treasury secretary. Over the weekend, the Chinese government indicated the Covid outbreak could infect “80%” of the population and those views have resulted in predictions that China is close to or has passed the peak of patient counts in fever clinics. If the Chinese Covid situation improves and anxiety moderates, then last week’s sharp platinum washout might have created a strong value zone. Even though the palladium market managed to reject a pattern of lower highs and lower lows last Friday, fundamental and technical signals still favor the bear camp.
GOLD / SILVER
Last week, the gold market managed to extend gains in the face of periodic adversity from strength in the dollar. However, the dollar failed to leave a sideways consolidation despite developments that should have resulted in a strong close last week. Fortunately for the bull camp, the gold trade appears to be capable of shifting its fundamental focus among various bullish forces with buying off flight to quality surfacing several times last week. Furthermore, interest rates appear to have steadied at levels notably below the levels seen throughout most of the 4th quarter of 2022. In a modest intermediate supportive overnight development, the government of India is set to cut gold import duties to reduce smuggling with predictions that the government would bring the gold import duty rate below 12%. The move to reduce gold import duties in India could revive domestic refining which has been idled because of unprofitable conditions. In a negative news article on Bloomberg, gold ETF holdings in 2022 dropped by 90% with the total inflow significantly less than 2021 and 2020. However, it should be noted that gold ETF holdings showed very significant gains in the first quarter of 2022 before peaking during the 2nd quarter at around 75 million ounces and declining to 67 million ounces into the end of the year. With 2022 presenting a bearish combination of sharply rising interest rates and the dollar exploding until October, investors should have been discouraged last year. Obviously, the silver market is not benefiting from financial and economic developments impacting gold on a daily basis. Therefore, the silver market is likely to track physical commodity market developments and potentially track in sync with equity prices. Surprisingly, the extended sideways consolidation and chop on the silver charts has not moderated a net spec and fund long in silver which is at the highest level since April last year.
As indicated in other coverage this morning, the Chinese government apparently thinks that 80% of the population may be infected in this surge, and that could foster hope that infections will peak soon. In fact, if the country has 80% infected and/or exposed, that could lead to a period of natural immunity. Over the weekend the copper trade was presented with an International Copper Study Group prediction that the global refined copper market shifted into a deficit of 89,000 tonnes in November after posting a surplus of 68,000 tons in October. Another bullish development over the weekend came from Peru where Glencore suspended operations after protesters attacked their mining facility. While the copper market has seen its net spec and fund long position expand moderately in the wake of massive gains from early last week, the long positioning probably remains well below the 2022 highs.
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