Written Commentary
GOLD / SILVER
Gold and silver bulls traversed the first US inflation report in very good stead and appear to be poised for new highs in the wake of today’s US Producer Price inflation report. Market chatter overnight is projecting the ECB to raise rates 25 basis points next month and yet gold and silver seem unfazed. However, with the dollar breaking out to the lowest level since February 2nd it appears that gold and silver will see an additional lift from the currency markets. Apparently, the gold trade is unfazed by news of a decline in Indian April 2022/March 2023 gold imports which registered a value of only $35 billion versus $46 billion in the previous year. However, negative Indian gold demand news is offset by optimism toward the Chinese economy following evidence of record Chinese iron ore imports in the first quarter. Going forward, the gold market is garnering significant bullish Press with several articles overnight predicting record prices and or indicating the gold rally has only just begun. Despite a lack of significant upside action yesterday in the wake of a soft US CPI report, the bias remains up in gold and silver into the 2nd round of critical US inflation data today. Perhaps the trade failed to react to yesterday’s inflation news because the markets wanted a secondary confirmation that inflation was moderating. Therefore, it is possible that the post-US PPI report trade today will show increased bullish volatility. However, it appears the US dollar will be a steady supporter of the bull case in gold as an abatement of US inflation could result in the dollar giving significant ground relative to the euro and Swiss franc. With recent sharp gains in silver forged on surging volume and higher open interest it appears the bull camp has momentum on its side.
PALLADIUM / PLATINUM
At least for the time being, the platinum market appears poised to track higher with gold and silver, but the trade could also benefit as a classic physical commodity as overall global market sentiment continues to improve as the trade begins to see the end of the rate hike cycle. Furthermore, as indicated in gold and silver coverage today, strong Chinese iron ore and energy imports, combined with significant Chinese exports should foster a measure of optimism for all physical commodity markets. In fact, if the trade settles on a view that inflation has peaked, we suspect platinum will break out to the highest levels since early February today. However, it is possible that the latest US EPA ruling demanding cleaner auto exhausts by 2035 could be viewed as a long-term negative for PGM markets as the push toward electric vehicles should accelerate thereby shifting more demand away from internal combustion engines with auto catalysts. Fortunately for the bull camp, yesterday’s rally in platinum was forged on a pickup in trading volume and that could leave the bull camp with ongoing control today.
COPPER
In addition to an overall global risk on vibe, copper is deriving indirect lift from reports of record Chinese first quarter iron ore imports. In fact, the trade has also seen evidence of very strong Chinese energy imports and that should be a signal of a recovery in China. With the significant declines in LME copper warehouse stocks recently, LME stocks are now at the lowest level since August 2005! However, Chinese copper imports declined by 19% on a year over year basis indicating some lingering doubt toward the Chinese economy. Fortunately for the bull camp this morning’s 8-day high range up move projects follow-through to the next resistance point on the charts at $4.1345. While the global economic outlook was not improved dramatically by signs of softening US consumer inflation yesterday, the trade might need secondary verification of softening inflation from today’s US producer price index readings. Adding to the bullish track in copper is the fact that Goldman Sachs has turned bullish on the red metal and expects prices to rally 25% from current levels.
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