Written Commentary
GOLD / SILVER
With a fresh new high for the move in the dollar to the highest level since March 15th yesterday, the gold market is short term overbought and is facing ongoing currency related pressure. Surprisingly, silver has avoided the pressure seen in the early gold trade thereby signaling its continued focus toward physical commodity fundamentals instead of financial/currency related factors. However, gold and silver should see minimal support from a continued slide in US interest rates today. Fortunately for the bull camps in gold and silver Chinese nonmanufacturing PMI readings for May came in much higher than expected and that offsets softer than expected Chinese manufacturing PMI data. While it seems like the US is nearing a debt ceiling deal some economists are suggesting spending cuts in the bill will increase the chances of a US recession. Yet another negative weighing on gold and silver prices is a slight escalation in the prospects of a US rate hike after upbeat US scheduled data recently and particularly if a budget deal manages to reduce uncertainty throughout the markets.
PLATINUM / PALLADIUM
With a downside breakout overnight to the lowest levels since April 12th, a moderate net spec and fund long position is likely to provide stop loss selling fuel. Overnight platinum ETF holdings were up minimally by 696 ounces with holdings remaining 10% higher year-to-date which means investment interest talk today will not cushion prices. Obviously, the platinum market is undermined by slowing Chinese manufacturing PMI data released overnight and we suspect ongoing dollar strength and a risk off global sentiment environment will add to the pressure on platinum today. As indicated many times over the last several weeks, the palladium market continues to be out-of-favor compared to platinum, but with a net spec and fund positioning “net short” that could reduce the palladium aggressiveness of a liquidation wave in palladium from macro and technical forces.
COPPER
With the July copper contract spending most of the overnight trade in negative territory, disappointing Chinese manufacturing PMI data selling today is justified. Keep in mind, the Chinese demand component is probably greater than 60% of total world copper demand expectations and therefore the overnight Chinese data should not be taken lightly. However, it should be noted that Chinese nonmanufacturing PMI data was stronger than expected and that has muted copper demand fears somewhat. In a development that is more psychologically supportive than materially supportive, LME copper warehouse stocks broke a month-long trend of daily inflows with an outflow, but LME copper stocks remain 13,000 tons above Shanghai copper warehouse stocks.
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