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Metals Prices to Grind Lower


Despite favorable internal demand news the gold market starts off under pressure from strength in the dollar and signs of higher global interest rates. While comments from a Chinese state planner indicating they will push for an expansion of household consumption sounded like the 6th stimulus announcement, that news combined with a slight improvement in Japanese manufacturing PMI readings for July should have been more supportive of gold, silver, and many physical commodities. Unfortunately for the bull camp gold ETF holdings last week fell by 329,000 ounces with a decline on Friday of 50,383 ounces putting year to date holdings down 2.3%. Similarly, silver ETFs reduced their holdings by 810,870 ounces.

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With the downside failure last week extending a 2 week decline of $72, the platinum market has not benefited from the improvement in global economic sentiment. Therefore, platinum probably relies heavily on a noticeable improvement in the Chinese auto sector recovery as several stories of lost supply from power issues in mining facilities South Africa have not been a concern to the trade. Unfortunately for the bull camp last Friday saw 11,901 ounces flow out of platinum ETF holdings with holdings declining by 49,315 ounces last week. Palladium ETF holdings were down only 1 ounce Friday and saw 6533 ounces exit all last week with year-to-date holdings still up 11%. Unfortunately, platinum and palladium prices have slid despite the latest Swiss clearinghouse export tally showing stronger global demand.


With a Chinese state planner overnight indicating they were working to expand household consumption and given a favorable Chinese NBS manufacturing PMI reading for July, the upside breakout in copper this morning was justified. While the Chinese have offered at least 6 separate stimulus plans to stoke their economy, it was not until last Friday that some sign of psychological benefits were being seen with very aggressive gains in Shanghai stock markets. Perhaps the copper market was discouraged that the Chinese central bank did not cut interest rates. At the end of last week, copper forged 3 significant range trades with aggressive swings in both directions and with 2 of the 3 swings showing positive traction. Fortunately for the bull camp, last week’s gains in LME copper warehouse stocks were offset by a weekly decline in Shanghai copper warehouse stocks.


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