GOLD / SILVER
While April gold overnight managed a 3-day high and attempted to sustain a trade above $1850, it ultimately fell $14 from its overnight high. Some of the early weakness in gold is likely attributable to minimal strength in the dollar, risk off in global equity markets and slightly higher treasury yields. With the low at the end of last week $150 below the early February high the net spec and fund long positioning in gold has probably moderated significantly from the last reading in January of 206,016 contracts long. However, due to a hacking incident weekly COT report readings have been suspended and the trade is left to estimate market positioning. While the story has not gained traction, global speculation that China is poised to supply Russia with weapons in its war against Ukraine if that is the case that could create flight to quality buying interest in gold and will likely result in further deterioration of US/Chinese relations. In a supportive internal supply development for gold leaving gold ETF holdings down, Russia’s Polyus estimated its 2022 gold production declined by 11% on a net output of 2.4 million ounces. However, partially offsetting that supportive news is a forecast from the company indicating their 2nd half 2022 production increase by 38% versus the first half 2022. We suspect gold and silver will remain under pressure in the near term as the trade fears tomorrow’s release of the FOMC meeting minutes. However, according to the US Federal Reserve Chairman the Fed was not aware of the jobs data in their last meeting.
PALLADIUM / PLATINUM
Like other precious metal markets palladium surged higher overnight and promptly fell back aggressively from that rally attempt in a sign of lingering bearishness. Certainly, the bias in platinum prices from the charts remains down even though the market appears to have found some value at the $929 level. Fortunately for the bull camp, investors continue to expand ETF holdings with current year-to-date platinum ETF holdings up 2.1% year-to-date. Relatively speaking the platinum market in the last COT report (as of January 24th) held a large net spec and fund long of 25,891 ounces compared to palladium which held a net spec and fund short of 3531 contracts. Since the last COT report in late January platinum prices into the low Friday had declined by $150. Even though the palladium market appears to have found some value around the $1500 level and the spec contingent has likely expanded its net short following nearly $300 in liquidation, fundamental conditions of supply remain bearish leaving the bear camp confident.
Despite a risk off vibe in financial and many physical commodities markets this morning, the copper market has extended last week’s sharp recovery move and nearly tested the February high. While the COT report has been suspended due to hacking, the last spec positioning report showed a relatively low net long with the market currently sitting $0.05 below the level where that positioning was last measured. Apparently, the copper trade is unconcerned about the buildup of Chinese domestic physical supply and has also seen signs that China continues to utilize scrap copper to produce cathode rods. In fact, Bloomberg overnight indicated that domestic copper stocks inside China added 4500 metric tons over the weekend. However, the current copper trade is willing to discount the 2023 trend of higher Shanghai copper stocks and even higher regional copper inventories in China.
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