Like other metal markets this morning the copper market has not taken out last week’s strong spike up high, but prices remain cushioned by $3.60 and remain within striking distance of last week’s high. However, disappointing Chinese import export data for October hits at last week’s optimism flowing from rumors of China possibly reducing some travel restrictions. Adding into the Chinese import/export negative tilt on copper today is a decline in Chinese September copper imports of 1.5%. On the other hand, Chinese January through October copper concentrates and ore imports managed to gain 8.4% over year ago levels. Adding further into the bull case is the ongoing daily and weekly tightening of world copper supply. LME copper stocks have declined below 90,000 tonnes and could easily exhaust if China opens and provides stimulus. It should be noted there have been several weekly flows out of Shanghai warehouse stocks which could have eliminated all stocks if two consecutive large weekly outflows are seen back-to-back. With threats against supply in South America remaining on a slow simmer, the copper market is likely to focus on all things China.
GOLD / SILVER
While the gold and silver markets have not completely capitalized on the opening slide in the US dollar today, seeing gold and silver prices remaining just under last week’s spike up highs indicates the bull camp holds an edge into the US opening today. Unfortunately for the bull camp, investors reduced their gold ETF holdings for 7th straight day on Friday, with gold ETFs last week reducing holdings by a total of 732,827 ounces. Going forward, seeing gold and silver aggressively reject a downside breakout and forge a reversal on a jump in sharp trading volume adds to the odds of a key bottom. Obviously, the threat of additional central bank rate hikes remains directly in the windshields of the markets, but with US economic numbers consistently posting good and bad data, there is an argument that the US economy is standing up to the onslaught of higher rates. While the net spec and fund long in gold as of last Tuesday was 12,000 contracts above the prior week’s low, that low was the lowest spec long since April 2019. In retrospect, seeing the World Gold Council document a strong surge in central bank gold buying gives the bull camp a solid fundamental argument that has been missing for nearly 9 months. However, going forward gold should remain in a tight inverse relationship with the dollar and treasuries as a transition into a full bull market will likely require demand to broaden with an expansion of investment demand. Recently, we have seen no sign of a trend of gold ETF inflows and therefore it could take rising market beliefs that inflation might not be controlled by monetary tools to ignite gold from a bull trend. Significant downtrend channel resistance in December gold was regained last Friday at $1,683.15, and that trendline becomes a key pivot point today at $1,680.70. Not surprisingly, the silver market exploded last Friday after showing several weeks of positive chart action with numerous rejections of trades below $19.00. Silver also saw some of the most significant and supportive fundamental information in many months from a massive jump in Indian silver imports. According to Bloomberg, Indian silver consumption is expected to jump by 80% this year over last. However, India bought historically low amounts of silver in 2020 and 2021, and therefore investors and industry players are likely rebuilding what they de-stocked during the pandemic. Like the gold market, the silver market has maintained a very minimal net spec and fund long positioning since May and the reversal into a net short in September combined with the jump in volume on the recovery Friday, indicates a key bottom has been forged. Last week silver ETF holdings declined by 7.7 million ounces and perhaps more importantly slid by 5 million ounces on Friday alone. Recent downtrend channel resistance was violated in silver and becomes support this week down at $20.19.
PALLADIUM / PLATINUM
In retrospect, fundamental news for palladium over the past several weeks has been definitively negative, with talk of industrial use rotating from expensive palladium to less expensive platinum. Furthermore, reports indicate Indian platinum imports are picking up significantly from just 1.14 tonnes last September to 27 tonnes this November which is a record. From a short-term perspective, the platinum market is showing signs of becoming short-term overbought with the market maintaining a net long since the middle of September! Last week platinum ETF holdings declined by 6931 ounces with a decline of 10,330 ounces on Friday alone. Downtrend channel resistance from the March high and October high is initial resistance today at $966.55. Uptrend channel support in platinum is $910.80. As indicated already, bullish fundamental news for palladium has been absent with the talk of losing demand to platinum an overwhelmingly bearish development. Fortunately for the bull camp, the palladium market is net spec and fund short and there appears to have been a measure of consolidation support zone built at the $1,800 level. Last week palladium ETF holdings decreased by 2476 ounces but are running 18% lower year-to-date.
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