Bull Camp Regains Edge in Silver

GOLD / SILVER

While the initial high in April gold this morning failed to take out the Friday high, prices remain significantly above last week’s low and near the highest level since February 15th. Both gold and silver could have been undermined because of the Peoples National Congress meeting in China failed to present a major stimulus package. In a negative overnight psychological headline, gold demand was questioned by a survey in India which indicated 65% of Indian women think housing investments are more important than gold investments. In retrospect, gold and silver bulls were extremely fortunate last week that bearish outside market influences did not send prices reeling to the downside. In fact, the gold market showed extremely impressive strength in the face of growing interest rate adversity and recent signs of a deterioration in investment interest. However, evidence of very strong buying from the Turkish central bank and news from the IMF that global central bankers purchased record gold for reserves last year should provide gold with a strong injection of important internal fundamental support. While a very unlikely development at present, market chatter suggesting rate hikes are not containing inflation could be a “switch” capable of turning on classic inflation, speculation and flight to quality buying of gold. Unfortunately for the bull camp, the sharp range up rally in gold at the end of last week was done on very low trading volume and a very minimal uptick in open interest. The silver market action has been significantly less impressive than gold action since the late February low, but the bull camp has regained a slight edge. Unfortunately for the bull camp, the large range up move last week was forged on softening trading volume and declining open interest. However, silver ETF holdings remain 1.7% higher year-to-date and have seen a developing pattern of very large daily holdings change, potentially indicating increased investor activity or simple attention to the asset class.

PALLADIUM / PLATINUM

While a portion of the gains off the late February low in platinum were likely classic short covering from the sharp January through February high to low slide of $217, the platinum market is very likely benefiting from persistent improvement in Chinese economic expectations. Looking back on February, US new vehicle sales were 14.88 million annualized units versus 15.87 million annualized units in January, but the February reading was still the highest since January 2022. As in other markets, the COT report in platinum remains a full month behind schedule due to mechanical issues and with the market following the latest report declining $83, the net spec and fund long probably reached the lowest level since October 2022 into the February low. The most positive thing that can be said about the palladium market is the capacity to reject last week’s spike low and began to build consolidation around the $1,400 level on the charts. However, a close 2nd bullish issue is the fact that palladium ETF holdings have posted the largest year-to-date gain of precious metal market ETF instruments this year with a gain of 13%! Relatively speaking, seeing palladium ETF holdings increase last week by 32,087 ounces should foster positive views toward future investment demand. Another supportive condition is the likelihood that the palladium market into the February low posted a fresh record net spec and fund short with the market from the last COT positioning report mark off falling $313.

COPPER

With the copper market finishing last week on a back foot and sitting $0.15 below the high of the week early today, the market does not appear to be impressed with Chinese growth projections from a national party meeting. Not surprisingly, talk of improving Chinese economic conditions has lost its directly positive impact on copper prices. In fact, copper failed to benefit from a trend reversing decline in weekly Shanghai copper warehouse stocks last Friday of 11,475 tons. However, the moderate decline last week followed nearly 2 months of extremely large weekly inflows. The bull camp should also be discouraged following a lack of significant strength in copper prices following a very favorable Caixin manufacturing data report released last week. Looking ahead there will be Chinese inflation readings late this week but those figures are unlikely to have as much impact as CPI readings from other countries.

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