GOLD / SILVER
Strong early action in the gold market today is very surprising with the dollar index exploding for significant gains overnight and given weakness in the silver market. In looking at the overnight charts, the dollar spiked higher in the wake of a wave of disappointing German, French and euro zone composite, services, and manufacturing PMI readings for June. In fact, gold prices in the immediate aftermath of the PMI readings from Europe also jumped with a compacted gain of $7.00 thereby accounting for the shift from lower to higher. While it is not premature to assume the gold market is delinked from the dollar, it might be premature to suggest gold saw flight to quality buying off the emergence of economic uncertainty throughout Europe. However, it is possible that gold saw some lift from talk suggesting European PMI data renews fears of a hard landing in Europe. Countervailing the jump in Indian gold imports from Switzerland is a decline in Swiss exports of gold to China of roughly 6000 kg. Not surprisingly, both gold and silver ETF holdings fell again yesterday by 174,029 ounces in gold and by 335,190 ounces in silver. Without a major surprise geopolitical flight to quality incident, the path of least resistance remains down in gold and silver.
PLATINUM / PALLADIUM
Not surprisingly, the platinum market has caved in again this morning as the outlook for the Chinese economy remains disappointing through a holiday there, general spillover pressure continues to flow from gold and silver, and the spec and net fund long of 27,981 contracts suggest the market retains stop loss selling/long liquidation capacity. Even investors have turned away from platinum, with ETF holdings recently posting large outflows and reducing the year-to-date increase. Given the massive washouts in platinum and palladium this week, it is likely that palladium has finally capitulated with a major range down failure to fresh contract lows this morning. Like gold and silver, without positive Chinese economic prospects and a return to risk-on sentiment, the bear camp holds firm control.
With the copper market forging the most impressive uptrend channel of all commodities markets this month, a sharp reversal and downside washout is not surprising in the wake of an extension of this week’s global risk-off mentality especially given nearly a clean sweep of very disappointing GBP and European PMI readings for June. Obviously, the copper market was significantly overbought from the late May to early June rally of $0.40 and with Chinese markets closed for holiday, the trade was left to fret over lingering disappointment with respect to the Chinese recovery. While a 1100-ton daily decline in LME copper stocks brings this week’s decline near 10,000 tons, that news was no match for a reversal of sentiment toward copper especially after yesterday’s spike high reversal. In fact, with somewhat discouraging US jobs news yesterday and decidedly disappointing PMI readings throughout Europe, talk of a hard landing is justifiable and is clearly the catalyst for long liquidation and perhaps fresh outright selling of copper today. However, the copper market focus is nearly always locked onto China and its copper demand prospects and until Chinese infrastructure specific stimulus programs are announced we expect copper to back and fill on the charts.
Interested in more futures markets? Explore our Market Dashboards here.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.