Written Commentary
GOLD / SILVER
Not surprisingly, the gold and silver markets are under attack early with the dollar breaking out up and extending its sharp recovery from last week. Adding into the bearish tone is higher US interest rate signals and deflationary services and composite PMI readings overnight from China and the euro zone. Unfortunately for the bull camp, both gold and silver saw large outflows from ETF holdings on Friday with gold holdings last week declining by 43,390 ounces and silver ETF holdings down by a very significant 7.7 million ounces last week. With the hedge fund managers in the positioning report raising their net speculative long positions early last week the inability to sustain above the 200-day moving average at $1976.10 looks to be prompting significant stop loss selling. Fortunately for the bull camp the positioning report net long was near the lowest levels since December potentially reducing the magnitude of stop loss selling.
PLATINUM / PALLADIUM
Not surprisingly, the platinum market extended last week’s downside reversal with a major failure on the charts this morning as outside market influences weighed heavily on prices to start the holiday shortened trading week. A sign of deteriorating sentiment toward platinum was seen with an outflow from ETF holdings last week of 24,084 ounces which is a 1% decline in holdings in just 5 sessions. With soft Chinese and European composite PMI readings very disappointing, negative dollar action and higher interest rate signals, it is not surprising October platinum failed to hold support. In conclusion, the path of least resistance is down in palladium with the extreme oversold condition merely expected to slow the pace of the slide.
COPPER
Obviously, extremely soft Chinese Caixin services PMI readings for August serve to exaggerate negative macroeconomic pressure on copper prices early today. While a beleaguered Chinese real estate developer has made interest rate payments and moderated anxiety somewhat, fear of soft Chinese copper demand remains front and center this morning. While LME copper warehouse stocks posted a very minimal decline overnight, on Monday LME copper warehouse stocks jumped by a very significant 3,150 tons and that bearish supply news was followed up by a 1.7% increase in Chilean copper production in the most recent monthly output report (July). Fortunately for the bull camp, speculative positioning in copper as of early last week was already very bearish and given the slide in prices since the report was measured, copper may be nearing one of the largest net shorts in 12 months.
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