GOLD / SILVER
In retrospect, both gold and silver were fortunate to avoid significant declines last week in the face of predictions that US Fed funds might need to rise above 7% to quell inflation. While the Chinese central bank left rates unchanged overnight, the closure of schools in the capital city has sent a wave of fresh economic recession fear into world markets. Obviously, a significant range up breakout in the US dollar this morning has added fresh currency related selling interest in gold and silver. Fortunately for the bull camp, it appears that treasury yields might be poised to slide lower and that might serve to cushion gold and silver against strength in the Dollar. However, this week it is possible the markets will be presented with a temporary wave of euphoria from the upcoming kickoff of the holiday shopping season, and that could firm the dollar further and pressure the Treasuries thereby setting the stage for a quick decline in December gold down to $1,725. The COT positioning report for November 15th showed the noncommercial and nonreportable net long in gold at 147,131 contracts which is a 50,000 contract increase in the net spec and fund long on a week over week basis. In short, the gold market is relatively overbought in the spec sector and therefore vulnerable to negative fundamentals. Traders pressing the short side of the silver market should be aware that the Silver Institute in its latest publication predicted global demand for silver will rise 16% this year reaching 1.2 billion ounces and in turn creating the biggest deficit in “decades”. This week’s net spec and fund long position in silver was 31,230 contracts, a net increase of about 6,000 longs from November 8th! Key support in December silver is obviously $20.00 with a key pivot point in the trade early today seen at $20.55.
PALLADIUM / PLATINUM
Obviously, rising fear of global recession and escalating Chinese Covid concerns has shifted the path of least resistance down in the PGM markets. Unfortunately for the bull camp in platinum, the market is very vulnerable from a technical perspective with prices at Friday’s close sitting $184 above the September lows! Even the outlook for the US economy is moderating with more and more economists projecting recession and that combined with rising loan rates should leave demand forces in the PGM markets in the bear camp. Last week PGM ETFs reduced their platinum holdings by 31,610 ounces while palladium ETF holdings declined by a mere 102 ounces. Fortunately for the bull camp in palladium, the COT positioning report showed Palladium net spec and fund short 1,236 contracts and with the market into the low this morning more than $200 lower, the palladium market could become “mostly sold-out” with a return to a key consolidation low from early November at $1800.
Conflicting news continues to flow for copper regarding China. While some solid import figures have helped moderate demand destruction fears from the flow of Chinese quarantine headlines, it seems as if the Covid flare has become very serious again! While overall copper supply inside China remains tight, last week’s 9,641-tonne inflow to Shanghai copper warehouse stocks dampens the prospect of support from tight supply headlines. On the other hand, analysts expect copper treatment charges for Chinese smelters will remain high but solid forward demand expectations are of little interest to the trade today in the face of what appears to be a big picture macroeconomic let down. Like many other physical commodities markets, the ratcheting up of interest rates and predictions of recession have brought out the Bears in almost every physical commodity market this morning. Fortunately for the bull camp fund positioning in copper was relatively low at 13,732 contracts and from the report into the low Friday, prices had retrenched by nearly $0.30. Therefore, the net spec and fund position in copper has likely shifted short as traders’ position for recession.
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