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Gold Likely More Vulnerable Than Silver


With another large wave of US scheduled data today, the gold market is likely to remain more vulnerable than the silver market as slightly positive data should underpin physical demand hopes for silver. However, signs of ongoing investment interest in both gold and silver from this week’s inflows to ETF instruments should add an element of support for both markets today. In another positive demand story, an article in the South China morning Post predicts gold jewelry sales in Hong Kong are likely to increase by 30% in the Year of the Rabbit especially with activity restrictions removed and the return of social gatherings like weddings and other events. According to some sources the backlog of weddings and other celebrations from the extended activity restrictions is massive. Evidence for a surge in pent-up demand come from Hong Kong statistics which pegged marriages in 2021 at only 26,899 versus 44,200 in 2019. While we are not sure how long gold will remain in a “good data is bad for gold prices” posture, the markets certainly embraced that angle yesterday. While silver showed impressive strength in the early trade yesterday, prices ultimately fell back toward the middle of the last 32-day’s sideways chop in a disappointing session for the bull camp. Obviously, the silver market continues to present mixed chart signals and so far, the trade has not taken notice of a potential developing trend of increased investment flow toward silver.


With the entire precious metal markets sliding in the face of positive US scheduled data yesterday, it appears that platinum is not tracking classic industrial demand hope. On the other hand, the net spec and fund long in platinum last week remained relatively high at 28,840 contracts and with prices down only $23 from the report date, we doubt a major portion of weak handed spec and fund longs in platinum are out. Near term logical downside targeting is even numbers at $1000, with a reversal back above $1029.60 possibly facilitating a strong follow-through rally from stop loss buying. In the palladium market, optimistic views toward the Chinese economy and improving industrial demand from China have had almost no positive impact on palladium prices over the last 2 weeks. In fact, with a clear and uniform pattern of lower highs and lower lows in place throughout most of the last 3 weeks and a lack of bullish sensitivity to gold gains, the bear camp retains control of palladium.


While the copper market seemed to benefit from a generally upbeat wave of US scheduled data yesterday, the lack of a definitive upside move following strong data reconfirms the markets intense focus on Chinese copper demand prospects. However, given an extended Chinese holiday market closure in Shanghai, the trade did not see weekly Shanghai copper warehouse stocks figures released this week which we think saved the bull camp some pain today. Going forward, the Chinese Covid infection situation should result in a significant increase in volatility at the beginning of next week. According to the Washington Post, China is set to return to normal after 3 years of lockdowns, Reuters indicates severe cases have fallen by 70% from their peak and the BBC earlier this month pegged the total infection count in China at 900 million. In the end, if on the ground evidence early next week continues to confirm Chines government claims of sharply falling daily infections, March copper could streak above $4.40. Keep in mind, LME copper warehouse stocks have continued to fall daily and appear to be entrenched in that pattern. Furthermore, issues in both Peru and Chile continue to threaten production in South America.


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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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