Written Commentary
GOLD / SILVER
From a technical perspective, we give the edge to the bear camp with August gold near the middle of the last month’s consolidation zone and probing lower in a fashion that could target $1950. From a fundamental perspective, the bear camp also has an edge with the dollar initially making a 3-day high and extending the recovery off last week’s spike down move. Even investors have turned cool toward gold with Friday presenting a 15th straight day of outflows from gold ETF holdings. On the other hand, silver ETF holdings increased slightly on Friday but saw a net outflow last week of 3.1 million ounces. Apparently, seeing the Chinese cut interest rates again has not shifted Chinese gold demand hopes in favor of the bull camp and instead newswires overnight carried predictions of softening gold and jewelry demand inside China. In fact, retail sales of gold and silver jewelry appear to have plateaued with May sales at only 24% above last May, while March and April retail sales of gold and silver jewelry were up 44% and 37% over year ago readings. However, all is not negative from the demand front with Swiss gold exports to India in May jumping 34% to 31.2 tons vastly offsetting a decline in sales to the US and China. A sign of bearishness from last week came from a reduction in hedge fund gold long positions with the net long the lowest in 3 months. While gold and silver have not benefited from Chinese rate cuts, the growing prospects of Japanese intervention to support the Yen has traders looking for a currency market induced rally in gold after the previous BOJ intervention saw gold rally almost 2%. While the silver charts maintain a positive tilt, the massive washout last Thursday has left some would-be buyers on the sidelines.
PLATINUM / PALLADIUM
The charts favor the bear camp in platinum to start the holiday shortened trading week. Adding to the negative track is evidence that hedge fund managers reduced their net long to the lowest levels in 2 months. From a bearish demand perspective Swiss platinum export last month dropped 27% compared to April with a reduction of 220 kg. Even investment demand has weakened as last week platinum ETF holdings declined by 80,978 ounces leaving year-to-date gains at only 6.4%. Last week palladium ETF holdings increased by 2756 ounces and are 15% higher year-to-date. While the charts in palladium tilt in favor of the bull camp, Swiss palladium exports in May increased over April and hedge funds raises their net short positioning to a “record high”.
COPPER
With copper this morning at times trading $0.05 below the high last Friday in the face of another Chinese interest rate cut the trade shows entrenched fear of reduced Chinese copper demand from a sluggish economy. On the other hand, in a potential contrary signal, hedge fund managers shifted from a net short to a net long reading in last week’s positioning report, potentially signaling the late May and early June rally might become “bought out” with further gains. However, daily LME copper warehouse stocks posted a 2nd straight day of declines and a decline last week in Shanghai weekly copper stocks of 20.1%. On the other hand, at the end of last week daily LME copper warehouse stocks saw a massive single day inflow of 11,100 tons.
Interested in more futures markets? Explore our Market Dashboards here.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
