Copper’s coiling action going into month-end and quarter-end may be setting the market up for a sizable breakout move during the rest of this week’s trading. While the demand outlook may be improving, the market may need to see positive news out of China to go into the weekend on an upbeat note. May copper could not sustain upside momentum yesterday, as it finished an outside-day session with only a minimal gain, but it has shaken off early pressure and is moderately higher coming into this morning. Chinese equity markets were able to break their losing streak with mild gains today, while a cut in second quarter refining changes may be showing that Chinese copper ore concentrate supplies are starting to tighten. LME copper stocks rose for the first time in eight sessions, but they remain near their lowest levels since early March.
GOLD / SILVER
Talk of increased insurance costs in the wake of the banking crisis put a light bid under the gold market overnight that helped it bounce off its lows, but it was not enough to take the market out of its recent consolidation. The dollar was slightly weaker, which also supported gold, and a breakout rally in silver also lent support. The improved risk-on attitude this week is negative for gold, but so far, the market has avoided a steep selloff, despite gains in equities. The market has consolidated since putting in a high on March 20, and this has allowed it to correct some of overbought technical condition it had developed in its rally off the February 28 lows. The banking crisis has eased, and this has pulled the flight to quality impetus away from the market, and it could be difficult for gold to start a new leg higher without some fundamental driver. Lacking such an event, the bears could have the upper hand in gold. If the Personal Consumption Expenditure Index (PCE) on Friday comes in hot, it could boost expectations for further aggressive rate hikes by the Fed, which could support the dollar and pressure gold.
PALLADIUM / PLATINUM
Like silver, the PGMs seemed to draw support from a rally in the equity markets overnight, as a more positive economic view should support demand for industrial metals. April platinum rejected yesterday’s selloff with a reversal back to Tuesday’s high. On the break yesterday, the market held above the 0.618 retracement of it February-March rally, which is mildly supportive. June Palladium also rallied overnight, to its highest level in a week. The funds are loaded up on the short side of June palladium, and momentum indicators diverged when the market put in its contract lows this month. The main trend is down, and the market lacks a fundamental bullish story, but the market is oversold and does not offer a good risk/reward setup for sellers.
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