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Another Lower Low Overnight


With another lower low/downside breakout overnight and the lowest trade since the end of November, the technical condition in copper favors the bear camp. Furthermore, LME copper warehouse stocks saw another daily inflow (the 23rd consecutive inflow) overnight and the market saw fresh and concerning dialogue regarding the Chinese economy. Apparently, the copper trade is disappointed with the lack of Chinese government action to support their economy in the wake of disappointing data. Detracting from the bearish environment, the International Copper Study Group report yesterday indicated the March surplus in the global copper market narrowed to just 2,000 metric tons versus a surplus of 196,000 metric tons in the previous month.

copper pipes various sizes


With the dollar seemingly poised to grind out more gains, US interest rates elevated and a significant outflow from gold ETF holdings of 23,917 ounces the bear camp holds an edge into the Wednesday US trade. In addition to strength in the US dollar, the metals were also undermined from another upside breakout in US treasury yields yesterday. In a positive development, Indian demand reportedly showed some improvement early this week following last week’s washout. On the other hand, the Indian Rupee on Monday fell to the lowest level since mid-March and that could rob the gold market of bargain-hunting buying. Therefore, Indian buyers look to remain price-sensitive, but we also think gold and silver might not benefit from a big picture macroeconomic volatility event. However, the US debt ceiling conundrum is showing signs of atypical views toward US treasuries and therefore one must consider the global bond trade could be poised to shift investment away from US treasuries which would push US rates even higher creating the potential for further downside extension action in gold and silver. The silver market should be supported because of a very large 2.7 million ounces inflow to silver ETF holdings yesterday which pushed the year-to-date gain up to 0.7%.


With platinum forging a 6-day high yesterday in the wake of a higher dollar, weaker gold, and rising interest rates, the trade continues to show bullish resiliency. However, the July contract this morning has damaged its charts with a probe below $1050 and the market is likely feeling spillover pressure from an unfolding pattern of noted weakness in global equities. On the other hand, Commerzbank raised its platinum price forecast to $1300 from $1250 by the end of 2024 and more importantly platinum ETF holdings jumped by a scorching 9,903 ounces yesterday and are now 10% higher year-to-date. With the palladium market facing demand losses from substitution, a minimal outflow from ETF holdings yesterday and an extension of this week’s lower low pattern early today the bear camp has control. However, with the COT positioning report in palladium from last week showing a net spec and fund short of 5,311 contracts and prices into the low this morning $63 an ounce lower than where the positioning was measured, the market is becoming mostly liquidated.


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