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Gold & Silver Ease Back Overnight


Gold and silver eased back overnight as the markets awaited the election results and started to focus more on Thursday’s CPI release. The trade is looking for a monthly increase of 0.7% in headline CPI and a 0.5% increase in core. Those are “hot” numbers, and if they come in that way, it could reignite talk of another jumbo rate hike in December, which would support the dollar. Trader polls have been favoring a less-than-jumbo hike, with 2:1 in favor of a 50 basis points versus 75. The CPI number could change that. The likelihood of significant volatility today and tomorrow leaves both metals vulnerable to additional long liquidation and a possible pullback to the bottom end of Tuesday’s ranges. The dollar extended a three-session downdraft to a seven-week low Tuesday, which lent support to the metals, but it appeared to find some safe-haven inflows overnight due to uncertain US election results and the problems with a cryptocurrency bank. Chinese PPI showed a 1.3% year over year drop overnight. This was a smaller decline than was expected, but it does suggest that global inflationary pressures could be easing, at least from a commodity perspective. Chinese CPI eased but was still positive at +2.1% YOY versus 2.8% in September. At the end of October, the World Gold Council pegged ETF gold holdings at 1.639 tonnes, their lowest month-end reading since March 2020. In contrast, central banks have been acquiring gold. The WGC estimates that central bank holdings increased by 186.0 tonnes during the second quarter of this year and by a record 399.3 tonnes during the third quarter. While central bank gold holdings have only had one net quarterly decline in the past 11 years, their record increase in the third quarter was more than double the 145.2 tonnes in gold ETF outflows between March and October.

Gold and Silver bars


Platinum and palladium made new highs for their moves overnight, but they have pulled back into negative territory. Like gold and silver, they seem to be facing some profit taking in the wake of mixed and uncertain election results and in advance of Thursday’s CPI number. Chinese inflation data was not as soft as expected, but the drop in year over year PPI does suggest a slowing in commodity demand. Not surprisingly, platinum continues to perform better than palladium, having traded to its highest level since June overnight. Platinum’s long-lasting, sharp discount to palladium appears to have finally inspired some substitution in the industrial sector. A three-session/$90 rally took January platinum back above the key $1,000 level for the first time since early June. October US light vehicle sales reached a 14.9 million annualized rate, a nine-month high, indicating that domestic auto catalyst demand is improving. While China’s “Covid reopening” may see further delays, relaxed restrictions could result in a significant boost to global auto catalyst demand. Zimbabwe has started a new mineral royalty plan in which platinum metals group mining companies can pay a 50% portion in the form of minerals, which could result in larger PGM output from that nation.


Copper prices have lost upside momentum due to bearish demand news from China and uncertain US election results, but if global risk sentiment can turn positive again, they may be able to approach the August highs. December copper has held its ground inside of last Friday’s wide-sweeping range, but it followed Tuesday’s gains with a moderate pullback this morning. The market’s main source of strength continues to be tight supply. LME copper stocks have declined for 13 straight sessions, providing more evidence of tightening supplies. They have fallen 56,350 tonnes over that timeframe. Shanghai exchange stocks have fallen 30,500 tonnes (down 34%) over the past two weeks, and COMEX stocks reached a 31-month low last Friday. One of Codelco’s largest smelters will undergo major maintenance starting this month, which is expected to last well into 2023; this will also impact global supply.


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