Written Commentary
GOLD & SILVER
In retrospect, the gold market this week showed signs of reacting to flight to quality issues namely in the form of fear of growing economic uncertainty. On the other hand, despite a measure of risk on sentiment from global equities and a larger than expected Chinese reduction in mortgage rates overnight has not undermined gold because of a reduction in economic uncertainty! While the gains in gold and silver yesterday appeared to be exaggerated, given a very minimal decline in Treasury yields, a precipitous decline in the dollar justified a more significant positive price reaction than was posted.
PALLADIUM & PLATINUM
At times yesterday the palladium market was the only precious metal market trading lower. However, the spike down move yesterday was aggressively rejected, signaling potential value at the $1928 level in the June contract. As indicated many times over the last two months, the trade has consistently discounted the potential for severe global tightness of palladium, despite a very real potential to see 40% of the world’s production blocked from the market. The platinum market also rejected aggressive selling yesterday and managed to recover along with other physical commodities and the equities. In fact, platinum this morning has made a fresh 6-day high despite seeing platinum ETF holdings fall by a massive 17,315 ounces for a single day decline in overall holdings of 0.5% and pushing the year-to-date outflow up to 6.2%.
COPPER
Despite a prediction from Citi research predicting a moderate decline in copper prices in the coming 3 months, copper prices have extended overnight and have posted a 9-day high. A significant force lifting copper this morning is a larger than expected reduction in Chinese mortgage rates, but the market is also lofted by declines in both LME and Shanghai copper warehouse stocks. As has been the case for the last eight years, the dominating fundamental in the copper trade is the ebb and flow of all things China. Therefore, light at the end of the tunnel on the lockdown in Shanghai has prompted short covering and a measure of fresh speculative buying, perhaps by Chinese interests.
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