PALLADIUM / PLATINUM
While the PGM sector was on the defensive Wednesday, it has shifted back into divergent price action early today with platinum regaining the upper hand on palladium. Sluggish global risk sentiment has raised concerns about auto catalyst demand. Like gold and silver, the PGM’s seem to be facing some profit taking in the wake of mixed and uncertain election results and in advance of today’s CPI number. Chinese inflation data was not as soft as expected, but the drop in year over year PPI did suggest a slowing in commodity demand. Not surprisingly, platinum continues to perform better than palladium as its long-lasting and steep price discount to palladium appears to have finally inspired some substitution in the industrial sector. October US light vehicle sales reached a 14.9 million annualized rate, a nine-month high, indicating that domestic auto catalyst demand is improving. A hot CPI number later today could raise expectations of a more aggressive Fed and the possibility of a slowdown in PGM demand.
GOLD / SILVER
Precious metals are finding mild early pressure this morning, due in large part to the dollar extending its recovery move. With the US election mostly out of the way, metals traders are turning their attention to today’s CPI report. The trade is looking for a monthly increase of 0.7% in headline CPI and a 0.5% increase in core versus increases of 0.4% and 0.6% in September. If the numbers come in as expected or hotter, it could reignite talk of another jumbo rate hike in December. This would support the dollar and pressure metals. On the other hand, if the CPI readings come in very hot, the trade might doubt the Fed’s ability to control inflation, which could ultimately support metals. A severe washout in major cryptocurrencies weighed on global risk sentiment on Wednesday and supported the dollar, but that selloff has subsided early in today’s action. Chinese PPI showed a 1.3% year over year drop, a smaller decline than was expected, but it did suggest that global inflationary pressures could be easing, at least from a commodity perspective. Chinese CPI eased, but was still positive at a +2.1% year-over-year rate versus a 2.8% year-over-year rate in September. The World Gold Council is estimating that central bank holdings increased by 186.0 tonnes during the second quarter of this year and by a record 399.3 tonnes during the third quarter. Likewise, strong growth in silver consumption by India is cutting into warehouse stocks, which lends fundamental support to the markets. Russia withdrew from the occupied Ukrainian city of Kherson, one of their most significant retreats.
Copper prices have been fairly resilient this week as they remain in close proximity to Wednesday’s 2 1/2 month high coming into today’s action. Copper has been able to mostly overcome a negative shift in global risk sentiment as well as lukewarm readings on Chinese inflation. A fourteenth daily decline in a row for LME copper stocks provided more evidence of tight near-term supplies, and that has provided some measure of early support. Reports that Russian troops were withdrawing from the Ukraine city of Kherson provided an additional boost to prices Wednesday and offset news that Peru’s September copper production came in 13.5% above last year’s total. On the other hand, further delays with China’s “Covid Re-opening” have added fuel to ongoing concern over copper demand prospects, and that has pushed the copper market down into negative territory early today. There were reports that a Chinese firm will build a smelter with 500,000 tonnes of annual processing capacity, however, which bodes well for China’s long-term demand outlook.
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