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Gold Vulnerable to Sagging Physical Demand

GOLD & SILVER

In retrospect, the US Federal Reserve chairman held with firm with policy in his statements yesterday and that combined with a dollar recovery has put both gold and silver under modest pressure to start today. Overnight, inflation news from abroad was mixed but a decline in Chinese house prices probably gives credence to some views that inflation is peaking. However, gold, and other markets have been presented with clear intentions of 50 basis point rate hikes in each of the next two Fed meetings. Unfortunately for the bull camp the trade was presented with softer Indian demand views late last week and therefore the market remains vulnerable to any sign of slowing from classic economic data and from significant risk off days in equities. In other words, gold and silver continue to behave like physical commodities periodically questioning the ebb and flow of physical demand.

PALLADIUM & PLATINUM

With a higher high for 3rd straight session and fresh saber rattling by the Russian leader, the bull camp in palladium has a fundamental edge. However, palladium ETF holdings yesterday continued a pattern of outflows with a minimal outflow of 98 ounces thereby leaving year-to-date declines in holdings at 7.8%. On the other hand, both PGM markets yesterday showed impressive bullish resiliency, likely because of fresh predictions that Russian supply flows would continue to dry up. Along those lines, Johnson Matthey predicted a smaller surplus than initially expected with the platinum market likely to shift into a deficit before the end of the year.

COPPER

If anyone needed proof that the primary focus of the copper market remains Chinese copper demand, it was on display yesterday following signs of very minimal infections in Shanghai and the potential for a complete unwinding of activity restrictions in the city by June 1st. However, copper should find higher support on the charts from favorable US copper demand signals this week in the wake of better-than-expected US retail sales, capacity utilization and industrial production.

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