PALLADIUM / PLATINUM
With the overnight downside extension in April platinum projecting sub-$950 pricing the bear camp has control early today. In fact, the trade has not embraced evidence of a growing trend of investment in platinum with ETF holdings yesterday jumping by 12,747 ounces which leaves holdings 2.4% higher year-to-date. With a major range down failure in platinum knifing through the 100 day moving averages and prices reaching the lowest level since November 7th, it is clear the market is not embracing any bullish fundamental developments. In fact, South African PGM production for December declined by 5.3% on a year over year basis and one of the world’s largest platinum mining company CEOs indicated output is already declining because of severe electrical grid problems in South Africa. Fortunately for the bull camp in palladium, the sharp range down failure in prices this week was forged on falling open interest increasing the potential for the market to balance its technical condition quickly. However, PGM market bulls should be discouraged by the lack of benefit from news of a continuation of a long-held pattern of contracting South African PGM mining output. Perhaps a counter trend outflow from palladium ETF holdings on Wednesday of 4,527 ounces temporarily moderated hope of improving palladium investment demand. However, with palladium ETF holdings on the year up 4.3%, palladium is showing the strongest investment demand of the precious metal complex this year. Nonetheless, the path of least resistance in palladium remains down with the charts bearish and the trade unresponsive to classic bullish fundamental developments.
GOLD / SILVER
With signs of a bounce and or a rejection of the downside breakout yesterday, the dollar has shifted back into a negative for gold. Therefore, seeing gold extend down after yesterday’s poor close points to more erosion ahead. Seeing global equities under broad pressure and with the S&P forging a 7-day lower low, macroeconomic psychology is undermined and physical demand longs in gold and silver are likely under pressure to liquidate. While it seems premature, press reports are suggesting looming US inflation readings are already impacting the gold trade. Apparently, this week’s Federal Reserve commentary was viewed as very hawkish and therefore could roil the markets next week if inflation fails to decline. According to Asian financial Press reports overnight the anticipated new BOJ Gov. is seen as a very hawkish policy maker and that combined with Fed efforts this week to tamp down “rate cut” dialogue creates a bearish environment for gold, silver, and physical commodities in general. In addition to a slight deterioration in gold charts yesterday, the gold market was unable to benefit from a downside breakout in the dollar to 4-day lows and with the dollar becoming a definitively bearish force today the early lows in gold will probably be taken out. In fact, with jumps in initial and ongoing claims yesterday gold should have benefited from a slight tempering of hawkish central bank intentions. As opposed to gold, silver ETF holdings continue to show signs of a pattern of large inflows with 3.1 million ounces flowing in yesterday bringing the year-to-date gain up to 2.1 percent. However, silver has consistently disappointed the bull camp with prices failing to gain on risk on sessions and even failing in the face of periodic gold strength.
The capacity to avoid significant downside action this morning following another large weekly inflow to Shanghai copper warehouses and news that Chinese bonded domestic industrial holdings increased by 25,000 tons suggests the copper market is not facing an aggressive wave of selling today. If there is a positive for copper today it is technically based with the market’s rejection and consolidation respect of the $4.00 level this week especially with volume and open interest jumping on this week’s modest rally attempt. In fact, the copper market has not come under noted pressure following news that the Las Bambas mine in Peru will continue to operate but at reduced rates because of transportation disruptions for inbound and outbound traffic. If it were not for evidence of improving Chinese oil demand, Chinese copper demand views would be under even more attack. In fact, with copper prices sitting nearly $0.09 above this week’s lows yesterday and Chinese supply news today bearish, prices could dive below key support at $4.00. On the other hand, official Chinese press outlets indicate that serious illnesses and deaths from Covid have declined by 98% relative to last month’s highs.
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