PALLADIUM / PLATINUM
Despite the significant setback from last week’s highs ($270) December palladium prices remain high in the 2-month trading range and under pressure from deteriorating global economic psychology. In fact, with recession forecasts populating the headlines, the return of China from extended holiday a nonevent and negative outside market influences (strong dollar and rising US yields) the path of least resistance is down in palladium. The middle of the September and October trading range was tested and respected yesterday at $2151.50, and we see that level today as a bull/bear pivot unlikely to hold. Unfortunately for the bull camp, platinum ETF holdings continue to decline with an outflow yesterday of 2,305 ounces and a year-to-date decline of 14%. With the platinum market reversing direction and failing at key chart support and more platinum demand fear present than fear of disrupted Russian supply, we see platinum prices sliding below $875 and potentially down to $850 if commodities deflate along with equities.
GOLD / SILVER
While the US dollar did not hold the new high for the move overnight, the index remains in an upward trajectory from both fundamental and technical perspectives. Unfortunately for the bull camp another Bank of England intervention in domestic interest rate markets fosters whispers of financial contagion which in the current condition results in selling of physical commodities like gold and silver. With the added weight of recession predictions from a banking icon and central bankers taking any opportunity to squash inflationary expectations the stage is set for December gold to return to the late September lows down around $1,625. Not surprisingly, both gold and silver ETF holdings continue to flow out with gold holdings year-to-date down 1% and silver holdings year-to-date down by 15%. Fortunately for the bull camp the net spec and fund long positioning in gold as of early last week had declined from the 2022 high of 352,000 contracts to just 56,999 contracts at the end of September as that could serve to slow the pace of long liquidation. In the end, outside market/big picture developments favor the bear camp, unless the financial problems in the UK spark global contagion fears and investors seek safe harbor outside of classic paper assets.
In addition to deteriorating global economic sentiment, the copper market is disappointed with the return of China without a lessening of Covid restrictions. However, under the surface supply tightness fears throughout the base/industrial metals complex should provide support against an ongoing trend of deteriorating demand. Overnight the lead market in London saw prices jump sharply following significant declines in LME warehouse stocks and while LME copper warehouse stocks continue to rebuild daily, the world copper market is more interested in the very tight supply inside China. Yesterday copper found support from a 2nd straight month of lower copper production from Peru but saw that bullish news partially offset by news that the Peruvian government would not cancel a disputed copper mine permit. As for the LME ban of Russian metals, the exchange continues to gather information and discuss methods to enforce any decision to block Russian supplies from the world markets. Obviously, outside/macroeconomic conditions favor the bears with recession forecasts becoming a daily event. Furthermore, unending strength in the dollar and no sign of major change in the status of the Chinese economy weighs heavily on copper prices.
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