GOLD / SILVER
While gold and silver are tracking in negative ground early today, both markets have held near yesterday’s spike up highs. Fortunately for the bull camp, the gold and silver trade shaped the yield curve policy change from the Bank of Japan yesterday into a positive by focusing on a weaker dollar. In retrospect, the magnitude of the gains in gold and silver prices yesterday seemed excessive considering contradictory outside market influences between the dollar and US treasuries. In fact, with US treasuries diving sharply yesterday off the very subtle adjustment in Bank of Japan yield curve management policies that should be seen as a development capable of lifting global long-term yields significantly in the months ahead. In our opinion, for the trend to entrench on the upside in gold and silver might require evidence of a developing pattern of daily investment flow into gold and silver ETF instruments. Apparently, buyers were so confident yesterday that the trade fully discounted news that Swiss gold exports to Asia and the Middle East dropped last month. The lower Swiss gold exports included less supply flow to Turkey which has seen its central bank become a noted buyer of gold this year. In an even more damaging statistic Swiss refined gold exports to China in November fell by 20% from October! The trend in the dollar is down and therefore the near-term trends are up in gold and silver.
PALLADIUM / PLATINUM
Extremely supportive outside market action from gains in gold and silver yesterday combined with a dramatic oversold condition from 5-days of aggressive selling has temporarily helped March Palladium attempt to build consolidation support around $1,700. In retrospect, open interest in palladium began to rise significantly as prices fell below $1,800 potentially signaling value is closer to $1,700 than $1,800. However, without a dramatic upgrade in market views toward the global economy, palladium prices might begin an extended waffle around the $1,700 level. Like the palladium market, the platinum market is devoid of fresh demand positive stories but continues to draft support from ideas that some Russian supply is backing up inside Russia.
It appears that the trading range in copper is poised to narrow as holidays approach and the Covid situation inside China gives off conflicting signals. On one hand, the press is circulating massive infection counts, while the government is claiming only a handful of Covid deaths in Beijing. However, press outlets have documented 40 hearses lined up at a Beijing crematorium leading some to conclude the death toll is more significant than advertised. However, Chinese trade data for November showed a significant month over month and year-over-year jump in both Chinese cathode and copper concentrate imports. Certainly, copper prices are finding support from the order to idle a Panamanian copper mine, but that bullish news is partially offset by reports that roadblocks around a Peruvian mine are being taken down. In a minor negative longer-term development Europe’s largest copper producer posted record profits and decided to plow significant capital into future projects. It should be noted that daily LME copper warehouse stocks continue a pattern of daily declines and the Panamanian copper mine poised to shut down supposedly represents 1.5% of total global copper supply.
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