GOLD & SILVER
With the dollar rejecting a 4-day high upside breakout overnight and returning to the vicinity of this week’s low the potential for technically driven volatility today is very high. Obviously, the potential for fundamental volatility in gold and silver prices today is justified with December US producer price index readings for December scheduled for release and that data thought to be a very important Fed policy input. Expectations call for a contraction in producer prices of 0.1% which would clearly provide gold and silver with fresh buying interest. Going forward gold and silver will obviously take a significant longer-term direction cue from today’s US PPI report as the markets micromanage inflationary expectations to predict the ultimate trajectory of US interest rates. In the end, traders should expect chain reactions in financial markets which in turn should prompt reactions in interest rates sensitive physical commodity markets.
PALLADIUM & PLATINUM
With the palladium market yesterday extending a 2 day slide aggressively and then rejecting the $1700 level (on good volume) the market has established a thin measure of chart support. Like gold and silver, the PGM markets yesterday saw significant contraction in the latest South African production readings for November. In fact, November South African PGM production declined by 22% extending a multiyear trend of falling output. However, a risk-off market trade on Tuesday justified the extension of last week’s lower low and lower high pattern in palladium. Relative to palladium the platinum market has a significant net “spec & fund” long position, with the most recent reading approaching the highest levels since April of last year.
Even though the copper market is becoming significantly short-term overbought, bullish fundamentals continue to justify strength in prices. In addition to an upward adjustment in a Chinese growth forecast from Goldman (+5.5% versus +5.2%) the market also saw many Chinese provincial governments release growth targets above 5% for this year. The copper market also saw further evidence of tightening supply following a 2022 copper output decline of 10% at Antofagasta. Furthermore, protests at a Glencore copper mine in Peru continue to threaten output.
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