PLATINUM / PALLADIUM
With a downside breakout this morning putting October platinum prices down to the lowest level since July 10th the bear camp maintains control. Even though the magnitude of the net downside move in platinum this week has not been significant, the new low for the move combined with a lack of interest in supportive US light vehicle sales highlight a market preferring to embrace bearish views. Total US light vehicle sales were 15.735 million annualized units in July, up from 15.657 million in June and the 3rd highest reading this year. Furthermore, the July vehicle sales were 18.1% above last year and July was the 3rd largest year-over-year increase since June 2012 following a record year-over-year jump in May and the second largest year-over-year jump in June of this year. Like the platinum market, the palladium market showed little benefit from strong US vehicle sales, but the market managed to remain within a sideways consolidation pattern. However, seeing palladium respect consolidation low support is not surprising at all given the market probably continues to hold a record net spec and fund short.
GOLD / SILVER
With the dollar posting a higher high overnight, the lower low in the gold and silver markets was to be expected. Yesterday gold ETF holdings declined for the eighth straight session with a rather substantial reduction of 176,980 ounces bringing the year-to-date change in holdings to -2.8%. Silver ETF holdings saw a third straight day of outflows with year-to-date holdings now down 2.6%. In retrospect, the failure to see gold and silver benefit from the Fitch downgrade of US credit highlight a prevailing bearish sentiment in the precious metal markets. The bull case in gold and silver was not definitive to begin with and with outside markets shifting from periodically supportive to patently negative, the washouts yesterday were fully justified. Certainly, the strong dollar remains a primary bearish force but seeing US treasury yields reach the highest level since June 2022 is becoming a major bearish force. Bearishness toward precious metals is so broad that mining share prices have also come under aggressive liquidation this week. Looking ahead to Friday’s US jobs report, a strong report is likely to bump up the probability of a September rate hike but the reaction in the dollar to weak US scheduled data recently is unclear as the dollar on Tuesday rallied aggressively in the face of softer than expected data.
In retrospect, the aggressive rally in copper earlier this week was suspicious to begin with as China posted two disappointing economic reports in a row, with those data points following disappointing readings last week. Unfortunately for the bull camp, a much stronger than expected Chinese Caixin services PMI reading for July released overnight has failed to hold up copper prices. However, a portion of the threat of lost supply from Mongolia has been eliminated with copper mining companies and the government settling 90% of the tax issues threatening production in the country. Earlier this week the threat of lost production in Chile from governmental issues has ended following a significant extension of governmental permitting of copper mining operations in the country. It should also be noted that inflows from LME copper warehouse stocks have continued, and the market seems to have grown immune to Chinese attempts to stimulate their economy. While not a significant impact, a surging dollar and higher interest rates add to the bearish tilt which in retrospect resulted in a clear technical reversal.
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