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Gold & Silver Face Negative Pivot

GOLD / SILVER

To start the Wednesday US trading session gold and silver are facing a negative pivot in outside market action, but OPEC+ rumors of a 2 million barrel per day production cut could ignite energy prices and in turn provide a very rare inflation inspired lift in precious metal prices. Granted, broad-based “risk on” environment this week has been accentuated by new lows for the move in US treasury yields and from a massive rally in US equities. As indicated in other markets earlier this week, it appears the markets are beginning to factor in a potential end of the jumbo US interest rate hike cycle. Clearly, this week’s US scheduled economic report flow contributes to the one and done November jumbo rate hike theory, with the month over month decline in construction spending the weakest in 18 months and the month over month decline in the Job Openings & Labor Turnover (JOLTS) statistics the largest in 30 months. Even though the decline in US implied treasury yields yesterday were not significant, short-term technical and fundamental forces project further softening of US yields. Unfortunately for the bull camp, precious metal ETF holdings continue to decline with gold holdings year-to-date approaching a decline of 1%, and silver ETF holdings year-to-date down 14%.

gold and silver

PALLADIUM / PLATINUM

With the palladium market ranging sharply higher early this week, the market is drafting lift from big picture macroeconomic optimism emanating from strong equity market gains and from a surge in Indian PGM import interest following a reduction in the import tax. Perhaps palladium also saw fresh speculative buying in the wake of a very bullish forecast from Citi which predicted strong demand from increased automotive chip production and warned of potential major supply disruptions from Russia. In a bearish overnight development, the press has indicated LME efforts to implement rules to limit Russian supply flow have yet to reach critical mass. Unfortunately for the bull camp in palladium, ETF holdings declined by 9,555 ounces yesterday and have now declined 14% so far this year. As in the palladium market, the platinum market also made a major reversal on its charts yesterday taking out 7-month downtrend channel resistance at $906. Near term upside targeting in January platinum is now $965.20 but the platinum market could run out of speculative short covering fuel quicker than palladium given the markets pre-existing net spec and fund long of 2,576 contracts as of early last week.

COPPER

Even though December copper forged a higher high overnight, the market recoiled from that high and is presented with a fresh negative in the form of reports of a labor deal in Chile potentially capable of avoiding a strike. Countervailing the negative Chilean supply news is yesterday’s report that overall Chilean copper production last month declined by 10.2% and production at state owned Codelco was found to have declined by 29.6% relative to year ago levels. While not as important as Chinese copper demand news, an avalanche of disappointing European PMI readings this morning highlights slowing in Europe and that indirectly reduces global copper consumption views. While the copper market has posted early two-sided chop again today, the market eventually ranged sharply higher yesterday in the wake of another wave of positive economic euphoria stemming from ideas that the US Fed could complete its jumbo rate hike cycle with the November meeting. In retrospect, the market should also continue to draft support from the supply-side of the equation with Antofagasta yesterday announcing their 2022 production would be at the lower end of a 640,000 to 660,000 metric tonne forecast range.

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