GOLD / SILVER
An extension of anxiety from the equity markets resulted in another intervention in the Guilt market by the Bank of England and that in turn has pushed the dollar to a fourth consecutive higher high. However, declines in gold and silver prices this morning are more than simple currency market influences. It appears that the world has revived recession fears in the wake of surging crude oil prices which have already posted October gains of $13.00. While the most significant impact on the Fed’s decision in the early November meeting will likely be focused on classic inflation signals from later this week, the US September jobs report ratcheted up the potential of a 75-basis point follow-through hike by the Fed. The October 4th Commitments of Traders report showed Gold Managed Money traders went from a net short to a net long position of 4,941 contracts after net buying 46,241 contracts. Non-Commercial & Non-Reportable traders were net long 98,358 contracts after increasing their already long position by 41,359 contracts. With the December gold contract last week stopped cold on 3 occasions at a 7-month-old downtrend channel resistance line, trend signals remain down.
PALLADIUM / PLATINUM
Something appears to be developing in the PGM markets with a low to high September rally in December palladium of over $400! As opposed to platinum, palladium ETF holdings have held relatively stable but could begin to see outflows with prices last week reaching $2,300 an ounce. Last week palladium ETF holdings were down by a scant 898 ounces but are 14% lower year-to-date. Big picture sentiment remains neutral to bearish with the net spec and fund positioning in palladium shifting a net short into a net long last week. Mixed sentiment toward PGM prices was apparent last week with Citi bullish from an intermediate perspective because of hope for improved auto sector demand, while Commerzbank sees the palladium market expected to trade lower ahead. Unlike palladium, platinum ETF holdings have continued to flow out at a quick pace leaving the net change in holdings this year down 18%.
Not surprisingly, the copper market at the end of last week fell under the broad liquidation wave originating from an extension of US jumbo rate hike fears. However, the Chinese holiday has ended, the market has been presented with signs of declining South American copper production and the US jobs report was strong enough to signal the US economy is standing up to monetary tightening. Unfortunately for the bull camp, Chinese Service’s PMI readings for September were released this weekend and those readings fell sharply. From the supply side, Chilean August output reportedly declined by 10%, while Antofagasta moved to reduce its copper output projections by 30,000 tons following water supply problems. However, the copper market has probably experienced some selling overnight following a report that inventories of copper in China rose by 16,500 tons last week during the Golden Week holiday. Fortunately for the bull camp the most recent positioning report showed an ongoing net spec and fund short which was obviously reduced with last week’s aggressive 14 cent rally.
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