Written Commentary
GOLD & SILVER
A forecast from HSBC suggesting gold will trade in a range bound by $1850 and $1970 for the rest of this year highlights our view that the gold trade currently lacks a definitive trend because of static supply and demand conditions. Therefore, it is not surprising that the action in the US dollar is likely to remain the most dominating influence on gold until there is a discernible shift in the market’s landscape. However, at present we think the bear camp has the edge with a pattern of outflows from gold ETF holdings extending to twelve straight days (down 1.4% year-to-date), fears of slowing in the largest gold consuming nation (China), and the unending overhang of rate hike fears.
PLATINUM & PALLADIUM
While the platinum market sharply extended the recovery from the recent lows this morning, the market faltered and reversed in a reaction indicative of a technical top. While it is possible that a stalled platinum project in Zimbabwe provided lift to prices the market recently has not been sensitive to larger and more material supply side developments. Furthermore, global macroeconomic psychology (particularly from China) is demand negative and a recent pattern of inflows to platinum ETF holdings did not produce an inflow yesterday.
COPPER
Not surprisingly, disappointing Chinese services PMI data has knocked copper prices lower especially with that information following soft Chinese manufacturing PMI data in prior sessions. In retrospect, the copper trade remains very skeptical the Chinese government will be able to quickly ignite the Chinese economy with a single directed stimulus package. The current copper market set up includes relatively tight current global supply and expectations that future production will not meet demand. However, the global economy has downshifted with both manufacturing and services PMI data softening.
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