Written Commentary
GOLD / SILVER
With the gold market short-term overbought and the dollar index making a new high for the move, this morning’s corrective action is justified. While surging oil prices should be stoking inflationary prospects, we think gold and silver have primarily been lifted by flight to quality buying from the Ukraine saga and not because of the inflation story.
PALLADIUM / PLATINUM
With palladium tracking higher this morning in the face of weakness in gold it is clear the threat against palladium supply from international sanctions remains the key driving force for prices. With Russia’s Nornickel reportedly responsible for up to 40% of PGM supply to the world, the potential for a full-scale fighting has fostered fears that Western countries and private sector entities will disrupt and close Russian palladium exports. While the platinum market rallied yesterday, the gains were unimpressive and indicative of a market not on the tip of the supply threat. Obviously, Russia is also a supply source for platinum, but the speculative focus remains on palladium.
COPPER
We remain highly suspicious of the sharp rally in copper prices as we see the market as a classic physical commodity facing highly uncertain demand conditions. However, a long list of commodity markets is rushing to factor in the prospect of embargoes and or supply chain disruptions of Russian physical materials. It should also be noted that Chinese manufacturing PMI, nonmanufacturing PMI and the Caixin manufacturing PMI all came in positive thereby boosting copper demand expectations.
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