Written Commentary
PLATINUM / PALLADIUM
Despite another outflow from platinum ETF holdings overnight, ongoing pessimism toward Chinese economic activity, a moderation of US economic optimism and very low July trading volume, October platinum yesterday posted another new high for the move and the highest price since June 16th. In short, fresh South African supply concerns, recent weakness in the dollar, signs of a developing uptrend in gold prices and prospects of an end to the US and European historic rate hike cycle should embolden the bull camp. Even the palladium market managed an upside breakout to the highest levels since June 26th yesterday and forged those gains in the face of strength in platinum, which suggest the PGM markets are set to move higher in sync.
GOLD / SILVER
At least initially, it does not appear that softer price measures from the UK and Europe have had an impact on gold and silver prices. Seeing softer inflation on the other side of the Atlantic helps tamp down the threat of higher rates abroad. In fact, overnight an ECB council member known as a hawk indicated monetary tightening beyond its next meeting is anything but a guarantee! However, the gold market certainly got a significant lift from a 2nd straight day of disappointing US scheduled data yesterday which in turn apparently reduced expectations for US rate hikes beyond next week. While we were surprised in the magnitude of the gains in gold yesterday, the gains in silver, platinum, and palladium were acceptable given the extension of “risk on” psychology in global equity markets. The bull camp is certainly given added confidence by the strong gains yesterday despite the dollar rejecting a new low for the move and posting a 4-day high close. However, the dollar overnight posted a higher high and could be holding gold and silver back from more significant gains. Looking ahead, traders should assume the same focus by the gold trade today with scheduled economic data the likely driving force for prices.
COPPER
Given a lower low for the move (5 day low) in the face of supportive macro conditions, the bias in copper prices remains down. Positives discounted by the trade overnight were a reduction in Antofagasta 2023 copper production guidance for this year from 670,000/710,000 metric tons to 640,000/670,000 metric tons from water shortages in Chile. The world’s largest producer indicated first half production was up 10% over last year but 2nd half output will lag considerably until a desalination plant is completed. In other bullish discounted developments, the world’s largest “mine” (Escondida) also indicated an output decline of 6% in the 2nd quarter following unplanned maintenance while Rio Tinto announced their 2nd quarter mined copper production came in below estimates by roughly 12,000 tons. Despite the copper market factoring in disappointing Chinese economic and copper demand fear unendingly over the last 3 sessions, that bearish theme looks to maintain its position on the back of the copper market. Today’s US economic data will focus on the housing sector with estimates calling for less strength than last month, but softer housing could also accentuate recent risk on sentiment from the argument of a coming into the US rate hike cycle.
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