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Higher Metals Prices


While gold and silver prices are showing higher action this morning a certain measure of short covering bounce was to be expected given the massive declines last Friday.  The gold silver ratio continues to suggest silver is very cheap and total year to date silver ETF purchases are 272 million ounces which in turn is closing in on 75% of total world physical demand.


We suspect that the massive reversal in palladium at the end of last week had its nexus from the washout in the gold market. Certainly, a partial risk off environment combined with a significant jump in the dollar fostered profit-taking which likely spiraled given that palladium was fresh off a $128/5-session rally. The corrective action in October platinum was not as aggressive as the slides seen in gold, silver and palladium Friday with the market showing some signs of periodic bargain-hunting buying on weakness. As opposed to palladium, platinum continues to see positive ETF investment inflow with holdings at the end of last week up 3.5% over year ago levels.


The massive washout in copper prices at the end of last week would seem to be a serious overreaction to a minor shift in fundamental conditions. However, the copper trade should have been unnerved by a failure to pass a US aid package, from an escalation of US/Chinese trade tensions and from a noted increase in weekly Shanghai copper stocks.


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