Written Commentary
GOLD / SILVER
The temporary flare in gold and silver prices yesterday sets markets up for a resumption of the downtrend. Apparently, the Takeaway from this week’s avalanche of US inflation data is the Fed still has significant work to do and that should set the stage for a decline below $1650 in December gold and below $18.00 in December silver. While not as significant as CPI and PPI in the eyes of the Fed, US import and export prices for September today could also have some influence on the need to continue jumbo rate hikes. The gold market will also be presented with a Fed index of common inflation expectations for the 3rd quarter and a University of Michigan five-year consumer inflation expectation report for October (preliminary). Overnight gold ETFs continue to see outflows with year-to-date holdings now down by 1.3%. However, silver ETF holdings saw a 2nd significant daily inflow of 4.4 million ounces! In a minimally supportive development, Barrick Gold Corp. said that it expects full-year gold production to be at the lower end of the range it forecast earlier.
PALLADIUM / PLATINUM
With platinum and palladium prices diverging over the last 24 hours we expect prices to fall back in sync today with platinum playing catch-up to the weakness in palladium over the prior 24 hours. In fact, platinum ETF holdings continue to flow out at a rapid pace with yesterday seeing 11,745 ounces moving out of position. Year-to-date platinum ETF holdings are down 14% while palladium ETF holdings are down 18% year-to-date. Unfortunately for the bull camp, the focus by exchanges to restrict metal flow from Russia has primarily involved aluminum, but it is also apparent that Russia could easily circumvent sanctioned barriers. In the end, the Takeaway from this week’s inflation data avalanche is the Fed “pivot” is nowhere in sight which in turn has started speculation on jumbo rate hikes beyond the November hike.
COPPER
Even though copper prices have posted two consecutive higher highs, the economic outlook for China remains negative with some headlines overnight touting a deflationary era. Furthermore, weekly Shanghai copper warehouse stocks more than doubled in the last week hinting at slack Chinese demand. However, the Shanghai copper stocks might have been heavily influenced by the weeklong holiday in China. Unfortunately for the bull camp, reports this morning suggest that as much as 14% of the Chinese population remains under lockdown! On the other hand, this week Chinese spot copper premiums held firm in a sign that forward demand could be picking up after the holiday week. In another sign of healthy demand under the surface, the world’s largest copper miner is apparently offering copper for 2023 delivery into Europe at record high premiums. The increase in the “premium” for European delivery from Chile was up 85% over 2022.
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