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Dollar Strength Sparks Deflation Washout

GOLD / SILVER

The reaction in gold and silver prices to the overall market condition this morning is a major disappointment to the bull camp, as a surge in US and global infections has fostered uncertainty and gold and silver appear to have embraced a slowing/deflation theme. Not to be left out, the surging US dollar is also contributing to the selling in gold and silver this morning even though falling US treasury yields should be cushioning prices.

PALLADIUM / PLATINUM

Apparently, the UBS predictions that platinum will come into favor over palladium from a substitution perspective last week, yanked the rug out from under the palladium market and this morning the market is caught under a wave of physical commodity market selling from the Covid spike. We would also suggest that palladium is fearful of Chinese intervention against historic high commodity pricing, and we also see last week’s failure to rally in the face of positive Chinese economic news as a sign that bull sentiment was already deteriorating last week.

COPPER

On one hand, the copper market is down aggressively to start the Monday Western trade, but on the other hand China logged a net gain in June copper concentrate imports of 5% compared to year over year readings and that should increase the chance that September copper will respect consolidation low support just under $4.24. It should be noted that Chinese June refined copper output increased by 2.6% over year ago levels in what we consider to be a fresh bearish influence.

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