Written Commentary
PLATINUM / PALLADIUM
Like other commodities, the platinum market is benefiting from a combination of short covering and fresh speculative buying off relief that the Chinese economy showed improvement in both heavy industry and retail sales readings. The platinum market is given an added lift from an inflow to platinum ETF holdings of 4691 ounces yesterday which brings the year-to-date gain in holdings up to 3.5%. Another positive is a notification from Platinum Asset Management indicating they will extend their on-market share buyback for up to 12 months and may buy back as much as 10% of their shares.
GOLD / SILVER
In addition to a justified short covering bounce from the oversold condition into yesterday’s lows, gold and silver are drafting lift from better-than-expected Chinese economic news overnight. Apparently, a portion of the gold and silver trade saw this week’s US CPI and PPI readings as inflationary and in turn, traders in those markets raised their expectations for a US Fed hike. It should be noted that the inflationary signs in this week’s key monthly US inflation reports were interpreted as dovish because excluding food and energy readings supposedly countervailed the headline gains. However, we think the odds favor a pause although not as high as the CME Fed watch tool suggested this morning at 97%. It should be noted that there will be US import export price readings released this morning and that inflation readings overnight from France and Italy softened or held steady at low rates. Furthermore, with the ECB raising interest rates yesterday and indicating the hike may be the last in the cycle, the US Fed has help in battling global inflation. In the near term, a slight reversal in the dollar is not cause for hope of a top but instead offers a temporary respite for gold and silver.
COPPER
Clearly, the copper trade this week “bought the rumor” of favorable Chinese retail sales data and/or improved Chinese industrial readings. We also suspect copper derived lift from improved sentiment flowing from the equity markets this week and perhaps from ideas that the ECB is reportedly done hiking rates. While the copper market could have benefited from a recovery in the yuan, lower Kazakhstan January through August copper production and from the favorable Chinese economic data, the market was overdone from a low to high rally and needed some technical balancing. Furthermore, Shanghai copper warehouse stocks increased by a noted 10,191 tons on a week over week basis and those stocks are quickly rebuilding thereby taking away a key bullish force.
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