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Flight to Quality to Lift Prices


Despite an S&P prediction overnight that the Chinese property company situation will be an isolated event, the gold and silver markets are trading higher to start today. Obviously, the potential for a financial contagion inside China, ongoing infection issues in China, significant global equity market declines and the potential for significant Chinese stimulus provides the gold bulls with plenty of ammunition.


As opposed to the gold market, the PGM markets failed to benefit from the presence of flight to quality anxiety yesterday and that is not surprising considering that platinum and palladium have generally tracked their physical commodity market fundamentals tightly over the last 2 months. However, the palladium this morning is not under pressure following news that Swiss August palladium exports were only 585 kg versus 712 kg in the prior month. Similarly, the platinum market remains under pressure because of the UBS prediction of a continued semiconductor shortage which in turn should keep global auto production at a minimum and demand for auto catalyst at a minimum.


With five days of massive losses, the bounce in copper prices this morning is not surprising especially given an International Copper Study Group forecast pegging the global copper market to have shifted back into a deficit in June from a surplus in May. The ICSG pegged the world copper market to have shifted into a deficit of 90,000 tons in June which compares to a surplus last year at this time of 67,000 tons.


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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