Bull Trend Likely to Extend

GOLD / SILVER

The interpretation of the US Federal Reserve developments yesterday ranged from more hawkish than expected to increased hope of a soft landing. Therefore, the sustained impact from the Fed favors the bull camp in gold and silver especially with the dollar falling precipitously following the meeting. As of this writing the result of the Bank of England and ECB monetary policy meetings are not known but expectations project 50 basis point rate hikes from both central banks. While the rate hikes are likely baked into the cake, a narrowing of the US interest rate differential should add modest selling to the dollar, which could add to significant early gains in both gold and silver. Following WGC reports of very strong global central bank purchases last year, news this morning from the Turkish trade minister of a 700% year-over-year increase in January Turkish gold imports reiterates a “trend” of central bank buying exists. In our experience central bank gold operations tend to last with reporting (according to the World Gold Council) usually delayed. In the end, the near-term direction in gold directly ahead is likely to be exclusively tied to action in the dollar and given a fresh lower low and the lowest dollar print this morning since the end of May last year gold and silver should have tailwinds.

PALLADIUM / PLATINUM

While the platinum market is trading nearly $25 above the double low from the two previous sessions, the magnitude of the rally in the wake of significant gains in gold and silver hints at a lack of bullish sensitivity. Fortunately for the bull camp the lack of upside action in a very bullish precious metal market environment has been countervailed by another notable daily inflow to platinum ETF holdings of 4991 ounces. With the 0.2% single day gain in total world platinum ETF holdings, platinum holdings are now 1.3% higher than at the beginning of 2023. Yet another bullish development markedly discounted by the bull camp is a 10% decline in Anglo-American platinum LTD quarterly production. On the other hand, the bear camp has received some assistance from news that in the Indian budget the import duty on items made from platinum has been raised! While there have not been recent stories regarding the threat of power outages in South African platinum production areas, the hottest season of the year typically put significant strain on the electric infrastructure and usually results in some production outages. Therefore, what little supply news might surface should be supportive. In the palladium market, the bounce off the spike low from Tuesday looks to be short-lived but will probably provide temporary support for prices today.

COPPER

With a very poor close yesterday in the wake of positive commodity market conditions, the bear camp continues to hold serve. While the tight global supply situation remains in place, that bullish argument has been dented overnight following news of a 50% quarter over quarter jump in Anglo-American copper production. However, other major copper producing companies have recently posted contractions in output leaving the supply situation in favor of the bull camp. In a bullish condition that has fallen off the radar, LME copper warehouse stocks continue to decline consistently, with inventories creeping near the lowest levels in modern trading history! As of this morning LME copper warehouse stocks have reached the lowest level since last March which is the modern trading era low in stocks. Unfortunately for the bull camp, the trade will be presented with Shanghai weekly copper warehouse stocks and those stocks are currently in a pattern of inflow. US Senator attempts put copper on the critical metal list which could restrict exports from the US. Clearly, the copper trade needs solid evidence that Covid infections continue to fall in China, but we suspect the trade will continue probing for a solid value zone around or below yesterday’s low of $4.1025.

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