More Gains Expected in Metals

GOLD / SILVER

With a significant range up move overnight gold has reached the highest level since last June and therefore the rally in gold has gained pedigree. The range up action in gold is thought to be largely the result of Western claims that Russia has not pulled back troops as indicated. In fact, the US/NATO officials have suggested that Russia moved “more troops” to the Ukrainian border. In our opinion the US military knows if troops have been pulled back given satellite coverage and perhaps sources on the ground. Therefore, flight to quality angst continues to flourish from the Ukrainian situation. After significant volatility in the oil market over the prior 3 trading sessions, the gold and silver trade could find it difficult to take price signals from that outside market force.

PALLADIUM / PLATINUM

As indicated already, debate on whether Russia has pulled back troops from the Ukrainian border region has shifted into a debate centered on Russia potentially moving 7,000 additional troops “to the border”. Unfortunately for the bull camp, Swiss palladium exports in January declined by 33% versus December and palladium ETF holdings yesterday declined by 947 ounces, but those holdings remain 0.9% higher year-to-date. Unlike palladium, the platinum market yesterday broke out and ranged sharply higher yesterday in a move that might be “catch up” move to the markets lack of initial reaction to the prospect of a disruption of Russian PGM exports.

COPPER

The outlook for copper prices off the Russian/Ukraine situation is very difficult to predict, as the trade could embrace the idea of tighter supply in the event Russian exports are blocked or the situation could result in the trade fearing global economic headwinds which in turn slow physical demand for copper. Overnight, the market was confronted with a forecast of a surplus in copper later this year, citing sharp increases in global interest rates which in turn slow the global economy and temper copper consumption.