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Gold & Silver Track Higher


The gold and silver markets are tracking higher this morning from a slight dip in the US dollar and perhaps from news of lower gold sales in the 3rd quarter from Russian gold miner Polymetal. However, some of the lift yesterday was generated by speculation that the Chinese were planning for the end of their zero Covid policy and this morning the latest rumors suggested the policy might last until March which is an eternity in the commodity markets. Despite yesterday’s World Gold Council demand boost from central banks, investors remain cool toward gold and silver with outflows yesterday of 41,674 ounces in gold and 560,976 ounces in silver. In retrospect, a jump in yesterday’s US JOLTS report shifts the December rate hike pendulum slightly in the direction of a 75-basis point US hike in December. The focus on the Fed’s view on the direction of inflation remains the overriding force for the markets with today’s post meeting information likely to result in significant financial market gyrations. However, the bull foundation in gold has been strengthened by this week’s World Gold Council quarterly report which produced improvement in demand from central banks and India. In fact, gold demand in India was up 14% over the previous year and consumption has returned to pre-pandemic levels! Unfortunately for the bull camp, Indian gold demand gains of 14% in the July through September quarter was offset by predictions that Indian demand in the 4th quarter would decline by 27%. Furthermore, according to the WGC, central banks reportedly bought 399 tonnes of gold in the 3rd quarter of 2022, which more than offsets another 8% quarterly decline in gold ETF holdings. In another positive demand development from the WGC’s report, world gold demand in the July through September quarter increased by 28% from the same quarter last year. Therefore, the gold bulls have finally found a solid bullish fundamental theme and it comes from the beleaguered demand side of the equation.

gold bars and silver coins


The charts in palladium remain bearish with the market unable to mount a significant recovery and return into the bottom of the July through late October consolidation which begins at $1,950. With UBS yesterday forecasting substitution rotation from palladium feedstock use to platinum feedstock use will pick up and potentially reach 800,000 ounces during the coming 3 years, recent upside performance in platinum prices relative to palladium prices is now justified. Yesterday palladium ETF holdings declined by 2,538 ounces and are now down 18% year-to-date. Selling resistance in December palladium is $1,946 and near-term downside targeting is $1,800. As indicated in our palladium coverage today, demand fundamentals for platinum are improving which partially justifies the early September to late October rally of $174. However, traders should be aware of the potential for massive price volatility today, especially if the trade interprets US Fed dialogue as dovish.


On one hand, the trade this week saw improved hope for Chinese copper demand following rumors the government was beginning to “plan an exit” of their zero Covid policy. On the other hand, subsequent rumors indicate the zero Covid policy could remain in place into March which in our opinion completely negates support from the initial rumor. Fortunately for the bull camp, LME copper stocks continue to fall at a very precipitous daily rate with stocks declining for 8 straight days, declining in 10 of the past 12 days and are now down 41,000 tons in two weeks. In a negative development, a Reuters poll released yesterday predicted the 2022 global copper market would likely post a deficit of only 70,000 tonnes and pegged the 2023 world copper market to post a surplus of 252,000 tonnes! Last week, community protesters in Peru indicated they planned to protest copper mining facilities at some point this week, but that issue has not surfaced yet in the headlines.


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