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Downturn in Metals Prices


As we have been indicating for months, the precious metals markets will not easily transition into flight to quality harbors. With a return to activity restriction rules in a broadening area of Europe and in the US the fear of economic slowing and commodity demand destruction are front and center again. In fact, overnight it was noted that global industrial demand for gold declined by 9% in the 3rd quarter relative to year ago levels which is clear evidence that gold is a commodity facing classic negative demand.


With the palladium market already in the midst of a technical breakdown on its charts late last week, a failure at consolidation low support of $2,302.60 yesterday and aggressive spillover selling pressure from the negative environment for most physical commodities, a quick slide down to the September low of $2,184.80 is likely directly ahead. On one hand, the January platinum contract ranged down sharply yesterday but rejected the lows aggressively as if levels just above $850 were some form of support. Even though the platinum market was able to sidestep yesterday’s broad-based big picture washout in commodities, a continuation of yesterday’s conditions should throw January platinum down to 30-day consolidation low support level at $841.70.


With an 1800-point decline in the Dow Jones industrial average since last Friday, strength in the dollar a rising wave of headwinds for the economy from activity restrictions and reports from a copper mine overnight that they will reach annual production targets pressure on prices is likely to return today. However, prices are showing some slight recovery action this morning following predictions that refined copper demand in China will continue to pick up and could accelerate by as much as 5% next year.


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.

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