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Declines in Metals Likely


The broad market environment today favors the bear camp in gold and silver, with the negative economic comments from China pressuring many commodities. Apparently, the Chinese Premier has warned of new downward pressures on the Chinese economy which some economists suggest could be the result of China fighting inflation by restricting output and potentially reducing commodity demand.


While substitution with the new materials in auto catalysts is a long way off, news that BASF was developing a “tri-metal” as a substitute for palladium to reduce the global deficit contributed some bearishness to the equation yesterday. Going forward, we see outside market influences impacting palladium today, especially if the US Federal Reserve announces it will start tapering this month. Even the beleaguered platinum market forged a big range up move Monday.


Overnight the trade suggested that copper has recovered off the tightening of global copper exchange warehouse stocks. However, the streak of daily LME copper warehouse stock declines was broken in London this morning with a gain of 2,550 tons. Given the copper markets intense focus on “all things China” the warning of threats against growth in China from a top Chinese official should have pushed copper into new lows for the move.

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