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Gold Responds to Inflationary Signals

Pushed into the market we favor the short side today


While gold did not make a higher high early today, the market nearly matched yesterday’s high and favors the upper end of the last two weeks trading range in the early Tuesday trade. A single day does not make a trend, but gold and silver for the first time in a long time responded positively to inflationary signals flowing from surging energy prices.


With the outlook for the auto sector improving slightly following comments from the GM CEO (she sees 4th quarter production to stabilize), a pattern of higher lows developing and positive equity market action, the near-term track in palladium is pointing upward. Furthermore, palladium recently held its largest ever net spec and fund “short” and in a thinly traded market, a major reversal from stop loss buying could take place even without a distinct shift in market fundamentals. With platinum somewhat tied to palladium price action and platinum significantly cheaper than palladium, platinum could be seen by investors as more attractive than palladium if inflationary fears become entrenched in daily market action.


For the most part, we see yesterday’s rally in copper as a short covering rally as the gains were forged in the face of a Chinese holiday and took place before the US posted a stronger than expected Factory Orders result. On the other hand, the trade saw signs of lower production from several of the world’s largest copper mines in Chile and therefore supply could have been behind the move higher yesterday.

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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