PALLADIUM / PLATINUM
A strong Chinese PMI reading overnight could support PGMs on ideas it will boost auto purchases and consumption of autocatalysts. Platinum and palladium experienced sharp rallies Thursday off an improving economic picture and gains in Chinese and US equity markets. July platinum punched through key psychological resistance at $1,000 overnight, leaving the next resistance at $1,009. A move above $1,014.60 would leave $1,040.10 as the next upside objective. A large net short position in palladium held by the funds has left the market vulnerable to short covering.
GOLD / SILVER
China PMI coming in above expectations at 51.9 should be bullish for gold, as it suggests growth in the Chinese economy that should provide a boost to consumption of gold jewelry, among other things. However, the gold market could be choppy today due to quarter-end rebalancing. The market is consolidating its rally from the first half of March, and from a technical viewpoint this puts it in a bullish posture. The banking crisis has eased, but it has not gone away entirely, and the pressure to raise rates seems to be softening, despite concerns expressed by Fed members that inflation is still too strong. Boston Fed President Susan Collins said on Thursday that she expects one more 25 basis-point hike despite lingering concerns about the health of the nation’s banking system. Initial claims increased by 7,000 to a seasonally adjusted 198,000 last week, a three-week high. An outside day lower in the Dollar Index yesterday seems to open the possibility that it will resume its downtrend, which would be supportive to gold. If the PCE number is below expectations (+4.7% YOY, same as the previous month), it could ease the pressure on the Fed to extend its rate hikes, which would also be supportive to gold. The consolidation of the past week has reduced the market’s overbought condition, and the bulls seem to have the upper hand.
Copper prices continue to see wide-sweeping coiling action, as they have been unable to sustain upside momentum this morning as they have given back early gains and fallen to the lower portion of their March consolidation zone. Chinese equities have followed a three-session losing streak with gains on Thursday and Friday, which boosts Chinese demand expectations. LME copper stocks have fallen for 7 of the past 8 sessions, which bodes well for global copper demand. Shanghai exchange copper stocks declined for the fifth week in a row. They have fallen to their lowest level since January, but this week’s draw was much smaller than the previous four.
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