Gold Poised for Positive Weekly Trade

GOLD / SILVER

With a minimal upside breakout and the highest trade since February 22nd, the gold market this morning is poised to post a positive weekly trade. Surprisingly, the US dollar remains subdued despite a flurry of forecasts this week of a higher US terminal Fed funds rate this summer. In retrospect, seeing consistent gains in gold this week in the face of a significant jump in US implied treasury yields suggests the gold bulls have regained some footing and confidence. However, gold ETF holdings yesterday declined by 117,090 ounces for a daily decline of 0.1% of total holdings. Perhaps gold and other physical commodities are beginning to accept talk of a more robust Chinese recovery and perhaps gold, silver, and other physical commodity markets will see lift today off anticipation of government stimulus from a national People’s Congress meeting in China this weekend. However, the trade will see a very active slate of US scheduled data today with particular focus on ISM services prices paid for February and the ISM services employment index given the proximity to nonfarm payroll readings next week. Fortunately for the bull camp some estimates call for a very sizable decline in the ISM services prices paid reading for February today which should undermine the dollar and provide added lift to gold and silver. However, traders should be aware of 3 US Federal Reserve speeches starting at midmorning and finishing around the middle of the afternoon as hawkish dialogue is more likely than dovish dialogue. While the gold charts this morning have extended a positive technical foundation, the silver charts are inconclusive to slightly bearish with prices caught in the lower portion of this week’s trading range. Even though gold open interest has increased on this week’s rally, the rise was minimal, and volume softened which could indicate a lack of confidence in the gold and silver bull camps.

PALLADIUM / PLATINUM

With a fresh higher high for the move likely this morning in April platinum and the market forging very impressive gains this week in the face of adverse outside market conditions, the bull camp apparently has an edge. However, the platinum market could be restrained today by US light vehicle sales readings yesterday of 14.88 million annualized units with that reading lower than the 1.58 million annualized rate in January. On the other hand, the February US vehicle sales were still the 3rd highest in 13 months. Obviously economic news from China remains supportive and the palladium market continues to be more resilient than the palladium market. Going forward, it is instructive to acknowledge that total global platinum holdings of 3,096,000 ounces are a very material percentage of total global platinum supplies. The charts in the palladium market remain uninteresting to slightly negative with sideways action posted in the face of consistent gains in platinum prices this week. Yesterday palladium ETF holdings saw a very minimal inflow of 279 ounces and remained 13% higher year-to-date. However, traders should be on alert given the importance of Russian palladium supply in the world supply scheme as efforts to remove Russian copper from the London exchange system could surface in the PGM markets and create a spark of fear of tightness in palladium.

COPPER

For the most part, the copper market showed choppy nondirectional trade this week despite favorable regularly scheduled Chinese economic data. However internal signs of rising supply inside China have undermined the bull camp for several weeks and we suspect yesterday’s reversal and soft close was prompted by longs with profits exiting ahead of today’s weekly Shanghai copper stocks data. The copper trade is concerned the US will implement fresh sanctions against China and tensions between the US and China could drift toward trade war status. Even though we give the bear camp a technical edge and fear speculative selling on threat of a developing US/Chinese trade war, economic optimism flowing from this weekend’s Chinese People’s national Congress, and predictions of a large global copper market deficit from Goldman yesterday should help diffuse selling in copper today. In fact, Goldman analysts have predicted a world copper deficit of 287,000 tonnes this year and have justified that forecast with evidence of lost production already in motion in South America.

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