Written Commentary
GOLD / SILVER
While it seems like an overreaction, August gold overnight smashed through what could have been seen as solid consolidation low support. However, we think the breakdown in the market is partially the result of the market not having a credible bullish theme and a large and apparently weakhanded net spec and fund long positioning. In fact, given the large downside breakout extension in the dollar yesterday and silver largely avoiding significant weakness until 8 hours after the Fed press conference, that suggests silver was being pulled down by something other than gold. While the Fed Chairman indicated there could be two more small rate hikes this year is on the face bearish for gold and physical, that was not a surprise revelation for the gold market. Looking back gold prices started to slide aggressively early yesterday afternoon with the last $10 wave of the wash coinciding with the overnight bounce in the dollar. Ultimately, the dollar index overnight recovered significantly with an 80-tick recovery off yesterday’s low thereby explaining part of the large gold decline.
PLATINUM / PALLADIUM
As in the gold and silver markets, the platinum market also failed at significant pivot point pricing of $975 partially from spillover selling and more likely because of disappointing Chinese industrial production and retail sales readings released overnight. It is also likely that estimates of expanded global palladium production spilled into platinum and enhanced spread liquidation further. As we indicated yesterday, seeing palladium forge gains/hold up in the face of another noted slide in platinum prices gives added credence to the idea that platinum/palladium spreads are being reversed. It goes without saying that palladium had a washed-out spec and fund long position last week with this Friday’s positioning report likely to register another new record short.
COPPER
With the copper market overnight posting minimal declines in the face of bearish Chinese economic data, strength in the dollar, and a slightly hawkish Takeaway from yesterday’s hawkish Fed press conference it is likely that a government closure of the Chilean state owned Codelco facility because of environmental issues has cushioned the market. In a less likely and somewhat suspect bullish argument the resignation of the Codelco CEO yesterday highlighted the failure of the company to reverse the sharp decline in production at the company to the lowest levels in 25 years. Another supportive issue is the developing pattern of large daily LME copper stock outflows. Also, Shanghai copper exchange stocks have declined in 14 of the past 15 weeks, with stocks at only 76,473 tonnes the lowest since the week of 12/30/22.
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