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Metals Optimistic About China Demand


With the dollar index coiling into a tight consolidation and both gold and silver ETF’s posting outflows in two of the last three trading sessions, the gold bears start the Wednesday trading session with a slight edge. However, news that Hong Kong was removing additional Covid activity restrictions and that inbound travelers to China will not be subject to quarantine in early January provided some modest speculative buying again overnight. At present the gold and silver trade is being cushioned by hopes for lower US inflation which in turn might reduce the upward track in interest rates. With the dollar bound in a tightening/coiling range a major currency market impact on gold and silver prices should be expected at some point soon.

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The gap higher in March palladium on Tuesday supports ideas that the market put in a major low last week. Softer than expected US economic data on Tuesday coupled with a slowdown in PCE gains last week suggest the US Fed is making progress on its inflation fight and raises hopes that interest rate increases will slow. Perhaps more important to PGM demand is the news that China is further relaxing its Covid restrictions, as that could boost auto consumption and therefore demand for auto catalysts like palladium and platinum.


While the copper market might have overreacted to the latest lessening of Chinese Covid rules, seeing the Chinese choose growth over the spread of Covid could be very positive in the “long term”. However, with infections rising, hospitalizations and funeral homes reported to be extremely busy, the impact of further opening could bring near term anxiety selling. However, Chinese November copper output increased by 10.3%, Bloomberg overnight indicated “slumping movement in key cities” which could lead to declining car and home sales might.

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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