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Fundamental Issues Has Metals Lower


With a fresh new contract high in the dollar in the early going today, the reverberations of hawkish global central bank dialogue have extended into the new trading week. Therefore, it is not surprising to see both gold and silver off sharply, with gold posting a new low for the month and seemingly poised for a slide to $1700. Certainly, the strength in the dollar is the primary bearish focus of the gold trade, but most physical commodity markets have also seen buyers rush to the sidelines from Fed commentary indicating tightening policy will remain in place for some time. Sentiment toward gold and silver is so negative that sharp declines in global equity markets are not resulting in flight to quality buying interest. In fact, the gold and silver markets failed to embrace flight to quality buying in the wake of a 1,000-point Dow slide Friday and in the face of a downside follow-through this morning.

Gold and US Currency


With the palladium market unable to hold Friday’s range up retest of the $2,200 level, investment continuing to flow out of ETF instruments, and softer Chinese industrial profits released overnight palladium looks to be on track to retest $2,000. Furthermore, spillover weakness from gold and silver, additional contract highs in the dollar, and risk off economic sentiment flowing from equities should thicken resistance in September palladium at $2,106. Fortunately for the bull camp, the net spec and fund long positioning in platinum is very modest especially with the market from that report mark off already trading $20 lower.


In addition to a worldwide fear of global slowing from unrelenting central bank tightening, the copper market is under added pressure because of disappointing Chinese industrial profit readings released over the weekend. The prospect of global recession is also being accentuated by sensational media coverage on the potential for brutal winter heating costs for the UK and euro zone. Copper market sentiment is so bearish this morning that 9-month highs in Chinese copper premiums were tossed aside because of weakness in US and European copper prices.

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