Written Commentary
PALLADIUM / PLATINUM
Despite the recent sharp gains in gold, silver, and platinum, the palladium market remains listless and seemingly without a key fundamental focus. Along those lines J.P. Morgan predicted gold, silver and platinum would end the year higher and suggested palladium would “struggle”. However, the palladium market continues to hold a net spec and fund short positioning which could increase the prospects of the market holding above $1,800. Obviously, the platinum market is the leadership market in the PGM complex with the trade seemingly embracing improving auto catalyst demand views and retaining a small premium for the prospect of disrupted Russian PGM supplies. Not surprisingly, the platinum net spec positioning is significantly overbought following the mid-November to early December rally of $96.00.
GOLD / SILVER
With the dollar showing signs of stabilizing above 104.00, this morning and interest rates tilting higher a portion of the anticipated lift from news that China may relax Covid restrictions (in its two largest cities) was lost on gold and silver. However, seeing China relax restrictions should support physical commodities worldwide. It should be noted that the upcoming global economic report slate is extremely active and therefore the prospect of rate hike talk volatility will be high. In retrospect, the magnitude of the overnight gain in copper is disappointing when compared to last week’s gains that were forged in the face of rumors of a loosening of Chinese activity restrictions. However, copper prices into the high this morning have rallied $0.35 from the late November low in a sign that the market has been anticipating a moderation of Chinese Covid rules. With the net spec and fund positioning in copper recently shifting from net spec and fund short to a net spec and fund long, and the copper market from the COT report mark off gaining $0.22 (into the high on Friday) the copper market is potentially the most overbought since April. Fortunately for the bull camp, Shanghai copper warehouse stocks tightened last week, and that news is magnified by further moderating of the Chinese Covid demand threat. As in other physical commodity markets, a significant breakdown in the US dollar likely contributed to last week’s rally and will likely continue to contribute to the copper bull case going forward.
COPPER
In retrospect, the magnitude of the overnight gain in copper is disappointing when compared to last week’s gains that were forged in the face of rumors of a loosening of Chinese activity restrictions. However, copper prices into the high this morning have rallied $0.35 from the late November low in a sign that the market has been anticipating a moderation of Chinese Covid rules. With the net spec and fund positioning in copper recently shifting from net spec and fund short to a net spec and fund long, and the copper market from the COT report mark off gaining $0.22 (into the high on Friday) the copper market is potentially the most overbought since April. Fortunately for the bull camp, Shanghai copper warehouse stocks tightened last week, and that news is magnified by further moderating of the Chinese Covid demand threat. As in other physical commodity markets, a significant breakdown in the US dollar likely contributed to last week’s rally and will likely continue to contribute to the copper bull case going forward.
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