PALLADIUM / PLATINUM
With the platinum market topping out early this week and near a 4-day low in the early going today, better US economic data yesterday has had no cushioning influence on prices. In fact, a 1288-ounce inflow to platinum ETF holdings yesterday brought year-to-date gains near 2% but for now that is unimportant to the trade. Bearishness in platinum is so prevalent that a deficit forecast from UBS earlier this week has been followed by a high to low slide of $30. Certainly, platinum could avoid a significant washout from strength in the dollar today, but platinum could diverge positively relative to gold and silver, if US data underpins positive views toward the US economy. As opposed to platinum, UBS has forecast palladium prices will fall to $1,400 by the end of this year due to slower economic growth, larger supply flow of scrap and automakers using more platinum as a substitute for auto catalysts. While South African mining operations continue to be threatened by potential power disruptions, flows in and out of palladium ETF holdings this week have shown little interest in adding or removing ETF holdings and thereby fundamentals have been offsetting. Nonetheless, palladium ETF holdings have posted the largest year-to-date gains in the precious metal markets of 5.5%. Near term downside targeting is the mid-February low of $1413.50 but a major washout in gold, a sharp pulse up move in the dollar and broad-based risk off sentiment will likely push prices below $1400.
GOLD / SILVER
With the dollar remaining in a modest uptrend and another critical US inflation reading in the form of PCE for January to be released this morning gold and silver will be presented with another critical junction. However, the market’s reaction to previous critical junctions this week has been muted but action has favored the bear camp. Expectations for today’s US personal consumption expenditures report call for a hot month over month gain of 0.5% and for gold to rally probably following the report likely requires a softer than expected reading or quick fresh new lows for the move are likely. Given the flow of US economic data over the last 2 weeks the odds of a 50-basis point rate hike by the Fed next month are on the rise and a one tick contraction in PCE today is unlikely to eradicate that new bias. Therefore, the odds are high that the fear of an extension of the rate hike window and expectations of an even higher terminal interest rate should leave the bear camp in control. Another unfolding negative for gold is the extending pattern of daily gold ETF outflows with yesterday posting the 10th straight outflow and pushing net sales this year to 1.4%. With the silver market posting a downside breakout in the early trade today, initial negative divergence with minimally positive early gold action should be of little supportive benefit later in the early session. In fact, the market is unlikely to find support from news of a 1.4-million-ounce inflow to silver ETF holdings yesterday with year-to-date holdings now up 2.2%.
With the copper trade upbeat toward Chinese one day and concerned the next, the bear camp took control earlier this week. While not a primary negative factor, another increase in weekly Shanghai copper warehouse stocks of 2857 tons this week continues a long pattern of inflows which in turn gives credence to fear of soft copper demand inside China. However, some of the build in Chinese stocks has been factored with preliminary internal Chinese industrial copper inventory gains released yesterday. While some traders have suggested the buildup rate is slowing, an increase of over 195,000 tonnes over the past 8 weeks (up 357%), has put Shanghai exchange copper stocks at their highest levels since April 2020. LME copper stocks experienced a mild decline this week and remain close to their 17-year low from mid-February. However, the Shanghai Composite has fallen for 2 days in a row, so early weakness in Chinese equities today leaves carryover pressure on copper prices. The outlook for Chinese copper demand continues to ebb and flow daily. In retrospect, the copper market was ahead of its fundamental skis with the highs earlier this week and without more favorable scheduled/documented Chinese data it could be difficult to avoid a slide below $4.00.
Interested in more futures markets? Explore our Market Dashboards here.
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.