PALLADIUM / PLATINUM
Like the silver market, the platinum market charts remain slightly bearish with lower highs and lower lows posted over the prior 4 trading sessions. However, a noted range up 3-day high overnight projects the April platinum above $1000 today especially with positive global equity market action, residual threats against supply in South Africa and signs of an extending pattern of investment inflows. In fact, given the surprise improvement in economic psychology following (and during) the Fed speech yesterday, the platinum market should see support build from ongoing investment inflows to platinum ETF holdings. Another background issue that should discourage sellers of platinum at current levels are signs that South African power grid structures are collapsing, and outages are beginning to undermine the economy and mining on a frequent basis. In fact, the largest platinum mining CEO in the world (Amplats) confirmed the decline in output from power issues. From a technical perspective, the palladium market has also rejected the slide from last week’s highs and has definitively rejected $1,600 pricing. While the inflow to palladium ETF holdings yesterday of 246 ounces is insignificant, year-to-date palladium holdings are up 5.3%! A point of interest for the trade is the fact that palladium ETF holdings were valued at $770 million yesterday.
GOLD / SILVER
The gold and silver markets continue to claw their way back from last week’s aggressive break and have rejected the downside extension on Monday with higher highs and higher lows. With the dollar remaining within this week’s sideways consolidation range, the gains in the gold and silver today are likely the result of other forces than the dollar. However, today’s US scheduled report slate (on its own) is unlikely to yield significant reactions in financial markets. On the other hand, there will be two Fed speeches today but given the muted response to the Fed chairman speech yesterday we expect only minimal headwinds from the morning and midday speeches. In retrospect, evidence of increased Chinese central bank gold buying from earlier in the week should be seen as a long-term supportive development for gold. For an extended period, Chinese gold reserves were not a known figure and the current “estimated” Chinese gold reserves at 2,025 tonnes seems to understate their actual holdings. At 2,025 tonnes, Chinese central bank gold holdings are one quarter of US central bank gold holdings. With gold and silver prices trading in sync with equity prices yesterday, the precious metal trade is considering physical, industrial, and investment demand environments in addition to dollar action. The failure of silver to close positive in the face of strong recovery action in gold highlights prevailing bearish view toward silver. However, the overnight trade in silver was exclusively in positive territory and other industrial metals like PGM’s, Zinc and copper are tracking positive early this morning.
Despite negative news overnight of a resumption of copper mining in Peru from shutdowns attributable to protests, Peru also posted a December year-over-year production increase of nearly 20%! However, LME copper warehouse stocks continue to decline with today’s decline of 1375 tons, and they posted another new low for the 21st century. On the other hand, LME copper warehouse stocks will need to continue a distinct pattern of declines just to begin to offset the massive jump in Shanghai copper warehouse stocks over the last several weeks. In an indirect supportive development for copper LME inventory of zinc reached the lowest level since 1975 and the press is indicating strong demand for zinc is surfacing in China and that could portend similar improvement in Chinese copper demand. While concrete information on the status of the Chinese Covid flare remains scant, a total lack of information might indicate the infection wave is moderating as a worsening would be leaking out. According to the Global Times, Chinese Covid deaths have declined by half from last week, but according to some forecasts a renewed infection flare is expected this summer. Unfortunately for the bull camp lower Chilean export revenues yesterday was offset by a private consultancy forecast of a significant jump in Peru production in December over prior year readings.
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