Gold & Silver ETFs Decline

GOLD / SILVER

While the dollar is slightly lower, US rates are slightly lower early and expectations for a pause by the US Fed next month expanded overnight, gold and silver do not appear to be interested in a minor shift in outside market influences. However, the December gold chart has a very uniform and entrenched pattern of lower highs and lower lows leaving the bear camp with a definitive edge from the charts. Not surprisingly, both gold and silver ETF holdings posted significant declines yesterday as investors flee from instruments that have consistently eroded over the past 35 trading sessions. Year-to-date gold ETF holdings are down 3.4% while silver holdings are down 2.8% year-to-date. While both gold and silver dove lower yesterday following outside market pressures flowing from higher US treasury yields, ongoing strength in the dollar and stronger than expected US scheduled data, both markets managed solid bounces from the early lows. However, with the dollar index failing to breakout to the upside with a higher high following hot US retail sales and lingering inflation from import and export prices, we suspect bargain-hunting buying was limited at yesterday’s low. In the end, the gold and silver markets saw aggressive selling yesterday from the 9-month high in US treasury yields but saw sellers back off as treasury yields fell back into yesterday’s close. In conclusion, gold and silver remain vulnerable to bearish adverse outside market action. Even though the CME Fed Watch tool prior to the retail sales report showed a very strong probability of a US rate hike pause next month (88.5%), the jump in import and export prices combined with a stronger than expected US retail sales reading likely sparked a flare of fresh rate hike concern yesterday.

PLATINUM / PALLADIUM

While the platinum market is trading in positive territory early today and short-term technical indicators have shifted into buy mode, the market is facing ongoing bearish outside market influences and negative inside market fundamentals. In addition to a developing pattern of notable outflows from platinum ETF holdings, the market overnight was presented with a reduced platinum price forecast from UBS (down $100) and news that Northam platinum holdings LTD saw an increase in sales revenue of 16.1% for fiscal year 2023 versus 2022. In a positive note, UBS still sees a significant demand rotation from palladium to platinum consumption at carmakers, but UBS also expects increased electric vehicle sales to result in a larger than currently forecast palladium “surpluses.” In the end, rising rates, a stronger dollar, and fears of slowing in the largest commodity consuming nation of China provides the bear camp with plenty of ammunition.

COPPER

While the magnitude of the new low for the move overnight was not significant, the lower low extends the bear case with short-term tech indicators remaining in sell mode. While the overnight inflow of 725 tons in LME copper warehouse stocks is not significant on its face, the extension of the inflow pattern is bearish. With the additional expansion of LME copper stocks today there have been 7 consecutive daily inflows and 21 inflows over the last 24 trading sessions. Bearish sentiment toward the copper space is broad with copper mining company shares also seeing selling pressure yesterday. Obviously, concern toward the Chinese economy and therefore fear of slackening Chinese copper demand remains in place and that is likely to extend the entrenched pattern of lower highs and lower lows on the charts. While there have not been fresh anxiety type headlines regarding the Chinese property sector problem overnight, Chinese house prices today posted a “contraction” from the prior month.

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