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PGMs Finish With Heavy Losses


A negative shift in global risk sentiment put pressure on the PGM sector with palladium and platinum both finishing with heavy losses. Both markets may have gotten overdone on the news China Covid relaxations, especially after it was reported that in the past week, they had the two highest new Covid case readings since late April. Yesterday palladium ETF holdings were virtually unchanged, with the year-to-date outflow remaining at 18%! Switzerland is a major refining hub, and their palladium exports increased 75% in October to 1,746 kilograms from 995 in September, according to the Swiss customs agency. Swiss Platinum exports fell to 1,602 kg from 1,755, a 9% decline. After a $273, 34% rally between September 1st and last Friday, January platinum is due for correction. Yesterday platinum ETF holdings declined by 6,758 ounces and are 15% lower year-to-date. The initial January Platinum target is way down at $969.90, with interim support at $974.00. Support for December palladium comes in at $1,958.30 and $1,936.50.

platinum bars


All things considered, the action in gold and silver prices this morning is impressive considering the wide sweep of predictions of significantly higher US Fed funds rates, several deflation projections, and predictions of deep recession from yield curve signals. In fact, the Fed’s Bullard overnight indicated that December would likely bring a 50-basis point rate hike but that ultimate Fed funds rates might need to surpass 7% to achieve full control over inflation. In a negative short-term development, the Swiss customs agency reports that Swiss gold exports fell to 159.6 tonnes in October from 174.4 in September, an 8.5% decline. Exports to India fell 36% to 22.2 tonnes, and exports to China fell 1% to 43.7 tonnes. Despite the overnight attempt to bounce the path of least resistance remains down in gold with classic bullish fundamental themes absent or expected to be discounted. In today’s action a decline below 106.00 in the December dollar index could inspire a minimal wave of week ending short covering buying, while a rally in the dollar index above 106.99, could result in December gold knifing below the $1750 level to close the week sharply lower. It is possible that gold is drafting minimal support from recent Chinese liquidity injection efforts, but with the US Fed discounting the likelihood of a “pivot” the totality of the factors facing gold and silver remain bearish. While the December silver contract overnight rejected a test of the $21.00 level on the charts, the path of least resistance is down with the bullish buzz from the beginning of November lost. Key pivot point pricing in the December silver contract later this afternoon is $21.055, with the market capable of failing at yesterday’s lows of $20.785 if the dollar rallies and gold violates close in support levels early.


With a downside failure posted early this morning the copper market looks to target $3.60 directly ahead. Certainly, recent Chinese liquidity injections provide cushion for prices but an increase in Shanghai copper warehouse stocks of 9,641 tons (up 12.7% on the week) ultimately undermines the hope for improving Chinese copper demand. LME copper stocks had their third daily build this week and remain close to 2-week highs, and that also weighed on copper prices yesterday. However, the copper market will continue to derive some fundamental support from threats against supply from Peru with the Las Bambas mine protests reportedly resulting in China reevaluating its copper trade with that supply source. Chinese demand concerns remain a front and center issue following a pullback in the Shanghai Composite and a spike in daily new Chinese Covid case counts, and that was a major source of pressure on the copper market yesterday. As in most other physical commodity markets increased hawkish dialogue from the US St. Louis Fed President (projecting even higher target Fed Funds rates) presents fresh copper demand fears leaving the market vulnerable to a poor close on the week. In fact, copper prices followed a 4 1/2 month high on Monday with 4 negative daily results in a row.


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