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Platinum Charts Turn Positive


While the platinum market might see negative outside market/macroeconomic pressure today, the charts have turned positive and flows into platinum ETF holdings continued yesterday. Platinum ETF holdings increased yesterday by 4568 ounces and are now 2.3% higher year-to-date. In another supportive overnight development, a source on Bloomberg indicated they see a 2023 world platinum deficit of 304,000 ounces. The source predicted improved demand from the automotive industry which could be suspect, given the ongoing jump in car loan rates and economic slowing concerns. It should also be noted that supply losses from South African power problems could and have probably already reducing output thereby potentially aggravating a global deficit. The strong performance in the PGM markets yesterday was impressive particularly with sagging economic sentiment, with the market also holding up relatively well in the face of a massive global risk off environment this morning. As in the platinum market, strength in palladium prices yesterday was impressive and surprising. We think the market was massively oversold with the low last week coinciding with a new high in open interest of 12,582 contracts, especially with the palladium market likely significantly net spec and fund short into last week’s low.

platinum bars


While a dominating risk off theme permeates the markets this morning, the dollar index is tracking slightly higher and adding to the negative macro view toward physical commodities. Furthermore, fear of hawkish US Federal Reserve meeting minutes this afternoon combined with a 50-basis point rate hike from the Royal Bank of New Zealand overnight provides the bear camp in gold and silver with several bearish themes. Even though several Fed members have recently pushed for jumbo rate hikes in next month’s Fed meeting, today’s meeting minutes release might not be as hawkish as market expectations as the Fed had not seen the ultra-strong January jobs results. Unfortunately for the bull camp prevailing expectations will likely remain hawkish despite countervailing dialogue in today’s release. However, if the US continues to show mostly positive economic reports, the prospects of an even higher than expected terminal rate in the US will grow. From a supply perspective, gold should receive minimal support from a reduction in AngloGold gold production targets for this year as the company shifts its focus to reinforce a waste dam in Brazil. A positive from the demand side of the equation came from IMF news that the Kazakhstan central bank continued its pattern of building gold reserves. Furthermore, the Indian Central Bank added minimally to their holdings in December (according to the IMF). Clearly, gold is not able to benefit from flight to quality buying following a 697-point dive in the Dow yesterday with early global equity weakness today also not yielding flight to quality buying interest in gold.


Not surprisingly, the copper market has recoiled from yesterday’s explosive rally and in the process has fortified the $4.20 level as primary resistance. Fortunately for the bull camp, Shanghai copper prices overnight held up while copper and other industrial metals softened in London. Furthermore, we are very surprised with the magnitude of the rally yesterday in the copper market as the rally was forged in the face of evidence of further supply building inside China and in the face of a very significant risk off wave building in the US. In fact, risk off sentiment could reach a temporary crescendo this afternoon following the release of meeting notes from the last FOMC meeting. However, some economists are beginning to push back the timing of a noted recovery in the Chinese economy from this month to next month and that could make the January consolidation high zone formidable resistance. With the US positioning report delayed until further notice (because of a hacking incident) it is extremely difficult to estimate the amount of liquidation of the spec and fund long on last week’s failure of the $4.00 level. Nonetheless we suspect the copper market was heavily liquidated early last week.


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Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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