Written Commentary
GOLD / SILVER
The gold and silver trade start the new trading week under pressure with residual pressure seen from the US nonfarm payroll release on Friday during the US market closure. While the US nonfarm payroll report failed to match expectations, the US economy did manage to spin off 236,000 new jobs, average hourly earnings increased, and the unemployment rate ticked downward which in turn rekindles fear of a US Federal Reserve rate hike next month. Therefore, gold and silver start out on the back foot with gold extending the technical damage from last week into the new trading week. A fresh undermine for gold from yesterday’s trade came from news that Indian gold imports in the prior 12 months declined by 30% (on a Dollar value basis) with higher customs duties and lower prices partially responsible for the decline. However, Indian silver imports increased by 66% in the prior 12 months on a year over basis which according to Bloomberg signals a change in consumer preferences to silver from gold in the country. Total Indian gold imports in the April 2022 to January 2023 time frame were estimated at 600 tons which is significantly below the normal 800-900 tons. Fortunately for the bull camp, China central bank gold reserves increased for the 5th straight month and are now reportedly above 2,000 tons.
PALLADIUM / PLATINUM
Despite weakness in gold and silver and despite an increase in US rate hike concerns, July platinum posted a higher low and higher high to start the new trading week. However, we are skeptical of the bull case with many commodity markets early today showing weakness and the trade facing the monthly global inflation report cycle this week. Fortunately for the bull camp, the most recent net spec and fund positioning in platinum is overstated with the market this morning trading below the level where the report was measured. With auto loan rates recently falling, investors pushing capital into palladium ETF holdings and a large net spec and fund short, traders should be aware of the rising risk of being short palladium at current levels.
COPPER
While there are some reports that US Chinese tensions are deescalating, wargames by the Chinese Navy and a very minimal decline in weekly Shanghai copper stocks last week leaves the bull camp without a definitively positive buzz from China. We suspect the US jobs report from last Friday is a minimal support for copper into the new trading week, but a wave of global inflation readings later this week will be an extremely critical junction for all physical commodity markets. The copper trade is somewhat undermined by minor supply and demand reports this morning with Codelco projecting its 2023 production to be steady and news that copper rod factories have increased scrap copper purchases.
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