Written Commentary
GOLD / SILVER
While it did not happen instantly, the significant overall of US Federal Reserve policy regarding the balance of its twin objectives of full employment and stable prices has ultimately sent money rushing into gold and silver. While the US dollar has not broken out to the downside yet this morning, the sweeping change in Fed policy should be a longer-term negative force which in turn should restart the March through August slide in the greenback. Therefore, the currency market impact on gold and silver shifts back into positive territory but it will likely take a dollar slide of 25 ticks below the early trade to ratchet up currency related buying of gold and silver today.
PLATINUM / PALLADIUM
While the PGM markets also showed significant volatility and wide trading ranges yesterday, they obviously weren’t as undermined as gold and silver. The palladium market might have found some fundamental value at this week’s low of $2155 with the market behaving more like a commodity now than a financial surrogate like gold. As in the case for copper, we suspect palladium will generally hold up and that it could claw its way above $2250 if that global equities look to finish the week with a definitive risk-on vibe. While platinum ETF holdings have shown some expansion this year, they have yet to enter the markets’ daily consciousness, and without that happening it could be extremely difficult to fully return to this year’s highs without a very upbeat recovery view.
COPPER
While the copper market showed only modest benefits this week from very strong equity market action and the dovish shift in the Federal Reserve policy, copper prices appear to have gained some traction this morning and will likely forge fresh contract highs directly ahead. While the decline in weekly Shanghai copper stocks was not significant, stocks did contract in China and the contraction in LME copper warehouse stocks has continued without respite. With the decline in LME copper warehouse stocks today inventories at the exchange have declined to the lowest level since 2005 and that should be seen as the main foundation of an ongoing bull market.
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