GOLD / SILVER
While the dollar has forged a triple high on the charts around 109.92 over the past 3 trading sessions, the overall chart and fundamental set up leaves the bull camp in control and the currency influence on gold should remain negative. Investors also remain negative toward gold and specifically to silver with gold ETFs yesterday falling for the 13th straight session and silver ETF holdings falling by a very massive 7.2 million ounces. It should be noted that the gold ETF outflow yesterday was also very significant at 172,318 ounces. While we see the market’s reaction to this week’s US inflation data as over reactionary, the general market buzz is more rate hikes are needed to quell inflation and the trade has even raised the odds of a 100-basis point rate hike next week to 33%! In short, the gold trade is likely to lock its focus on the fear of rising US interest rates and in turn the prospect of another leg up in the US Dollar.
PALLADIUM / PLATINUM
As indicated already, in the coming sessions we expect PGM prices to track with silver and not with action in gold. As we have also indicated, the PGM markets are likely to take some direction from the action in equities, but the trade will also be watching closely for confirmation that the Chinese city of Chengdu is in fact poised to lessen activity restrictions. However, without a significant headline surprise, the palladium market will probably lack follow through action in either direction unless Jumbo rate hike fears are whipped up again by US claims readings. Relative to palladium ETF holdings, platinum ETF holdings continue to post a pattern of aggressive outflows with the most recent outflow of 5,294 ounces yesterday resulting in a year-to-date decline in holdings of 12%.
While most visible fundamental factors favor the bear camp, reports yesterday that a recently locked down Chinese city might begin to loosen restrictions and the reopening of Shanghai after a typhoon closure tempers bearishness slightly. However, supply influences could suddenly shift positive if a labor conflict in Chile shifts into a strike. In the background, LME copper warehouse stocks have continued to decline and LME copper on a warrant (supply immediately available for withdrawal) has jumped sharply and reached the highest level since the end of June. Currently, LME copper warehouse stocks are at the lowest level since April 7th and have declined in 10 of the last 12 sessions.
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