Written Commentary
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.
COPPER
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.
Interested in more futures markets? Explore our Market Dashboards here.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
