GOLD & SILVER
While a lower low for the dollar and the lowest trade since February 16th certainly justifies strength in gold, some portion of the significant overnight pulse up move is likely to be flight to quality interest surrounding the California Bank failure. Furthermore, Goldman Sachs over the weekend predicted the Fed will not hike rates later this month because of the current stress in the financial sector! The flight to quality buying of gold and treasuries without purchases of the dollar highlights some concern of a US financial contagion but contagion is not widely feared as of this writing. While the gains in gold last Friday were outsized and overdone, if the trade sees the upcoming wave of global inflation readings signaling inflation continues to rise the gains in gold could become surprising. With the silver market showing significantly less upside action than gold from the May contract low on Friday, the silver bull camp is likely narrower in scope than in the gold trade. Furthermore, generally concerning global economic expectations look to leave headwinds hanging on physical commodities like silver.
PALLADIUM & PLATINUM
While we expect ranges in platinum to remain narrow, we also expect the general bias in prices to try to link positively with gold. In fact, investment interest in platinum ETF holdings was already strong with holdings last week increasing by 23,738 ounces (+7,634 ounces last Friday), lifting the year-to-date gain in Platinum holdings to 3.1%. As opposed to the palladium market, the platinum market showed some positive sensitivity with the gold trade late last week and platinum has built a somewhat credible consolidation low support zone at $931.
While the copper contract continues to respect and waffle around consolidation support just under $4.00, the early trade is encountering pressure from fear of a financial crisis which could trip up the global economy. We suspect the consolidation low support zone was given fundamental underpin following a 5-digit decline in weekly Shanghai copper stocks at the end of last week.
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