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Inflation at Consumer Level Could Challenge


While the gold market had difficulty rallying off a hot US PPI report yesterday, the market holds out hope that today’s US CPI report will offer a more sustained reaction. However, the gold market in the early going today is not overly sensitive to inflation, as Chinese inflation overnight posted a 26 year high at the factory gate and gold is tracking lower. In a supportive overnight development Pan-American silver reduced their fiscal year silver production by roughly 500,000 to as much as 2 million ounces for the full year. Unfortunately for the bull camp in silver, the charts are not as bullish as in the gold market, and silver has not been in lockstep with gold price action through recent inflationary headlines.


With a very large trading range on Tuesday, December palladium appeared to be poised for a strong range up extension. However, the December contract failed to hold above the psychologically important $2,100 level and at times during the session yesterday, the market was trading more than $100 below its high! As opposed to the palladium market, the platinum market forged a higher high and held most of those gains in the face of a noted reversal/failure in palladium yesterday.


According to overnight factory gate inflation measures, China is encountering 26-year highs in price gains and that would ordinarily spark concerns of tightening by the central bank. On the other hand, LME copper warehouse stocks continued to plunge which in turn should mean tightening supply can offset a measure of slumping Chinese copper demand. The copper market is seeing a slight amount of outside market pressure with aluminum and iron ore prices under significant pressure recently.

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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