Copper prices have clearly benefited from a strong “risk on” mood and have found some relief from Chinese near-term demand concerns. As a result, copper should extend its November rally into the weekend. December copper finished Thursday’s trading session with a sizable gain and has seen upside follow-through early today. Chinese officials are reducing their quarantine period for inbound travelers, which signals a relaxation in their “Zero Covid” policy proving some early price support. LME copper stocks have now fallen for 15 sessions in a row reaching their lowest levels since mid-March providing further evidence of tight near-term supplies. While Shanghai exchange copper stocks had a moderate weekly increase, that was offset by the optimism from sizable gains in Chinese and Hong Kong equities markets on Friday.
GOLD / SILVER
Precious metals have had several bullish developments that provided additional fuel to their November rallies, but gold and silver are seeing divergent price action early in today’s action. Although both are vulnerable to end-of-week profit-taking and long liquidation, gold and silver should remain fairly well supported if global risk sentiment maintains a positive tone. Yesterday’s much lower than expected US CPI readings led to a severe washout in the dollar and became a major source of strength for gold and silver prices. The market had priced-in upcoming FOMC rate hikes remaining large and reaching well above the 5% Fed Funds rate before they reach a ceiling. With inflation on the wane, however, those expectations will be dialed back which in turn should benefit precious metals. Although they rebounded from their early lows, several major cryptocurrencies continued to be pressured by issues at a major “crypto bank”, which in turn drove investment flows to gold and silver. Chinese demand remains an area of concern, but they are showing signs of relaxing their “Zero Covid” policy which should support prices.
PALLADIUM / PLATINUM
The PGM sector continues to be a major beneficiary of the current “risk on” mood with palladium posting sizable gains Thursday continuing into early today. While platinum has fallen back from an 8-month high, it remains in positive territory so far today. While the Dollar’s nosedive was a significant source of strength, the prospect of stronger auto catalyst demand next year has underpinned platinum and palladium prices this week. China’s October auto sales posted their slowest growth rate in 5 months, but still came in 6.9% above last year’s total in spite of their nation’s “Zero Covid” policy. In contrast, October US light vehicle sales reached a 9-month high and may continue to grow if inflation levels continue to subside. South Africa’s PGM metals output during September was 1.1% below last year’s total, which compares to a 12.9% year-over-year decline in August.
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