PLATINUM / PALLADIUM
With a large 9,500-ounce outflow from platinum ETF holdings, fear of deflation in China and a very critical US inflation report due out this morning, platinum should exhibit downside volatility and possibly retest the late June low down at $894.20. Obviously, spillover selling from gold and silver, disappointing Chinese economic news and strength in the US dollar provided intense selling pressure on platinum yesterday and more of the same is likely today. Therefore, we expect further declines in platinum prices ahead especially with outflows from platinum ETF holdings continuing and given waning hope for recovery of Chinese auto catalyst feedstocks demand. With the downside breakout and the lowest trade since July 10th in September palladium, the net spec and fund short has become even larger. As we have mentioned repeatedly, the magnitude of the net spec and fund short in palladium is extreme considering total open interest is barely twice the size of the net spec and fund short.
GOLD / SILVER
While yesterday was a very discouraging day for gold and silver bulls, today does not look to be in improvement. In fact, with the world largely accepting the likelihood of Chinese deflation and the Chinese economy capable of exporting deflation, should leave physical commodities out-of-favor. Not surprisingly gold ETF holdings fell again yesterday for the 12th straight session while silver ETF holdings dropped for a 5th straight session. In retrospect, with gold and silver ignoring flight to quality issues from economic slowing fear and noted financial/debt market concerns, the bear camp retains a solid grip on prices. A strong dollar apparently trumped lower interest rates yesterday, but US rate markets might set key trends following Thursday’s US CPI results. Bearish sentiment toward gold on Tuesday was dominating enough to fully discount news of significant central bank gold buying in the first half of this year. In fact, according to the World Gold Council, net central bank gold purchases in the first half of 2023 totaled 387 tonnes. Therefore, the first half global net central bank gold purchases were the highest on record with records dating back to 2000.
While the copper market has rebounded $0.08 from yesterday’s low and spent most of the early trade today in positive territory, widely anticipated deflation in China is a major headwind for copper prices. However, some residual hope of additional Chinese stimulus efforts remain in place but given multiple failed attempts to improve economic sentiment, a stimulus inspired rally in copper probably requires a very major stimulus program. In retrospect, the sharp range down washout in copper prices yesterday was fully deserved following extremely disappointing Chinese trade data which offers further evidence of an economy in trouble! While Chinese January through July unwrought copper imports fell 10.7%, that bearish news was partially countervailed by a 7.4% increase in Chinese January through July copper concentrate and copper ore imports. However, the copper market also face a very bearish and surprising jump in Peru copper production in June of 21.8% and that is a very fresh and very bearish supply development.
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