PLATINUM / PALLADIUM
With platinum forging a 6-day high yesterday in the wake of a higher dollar, weaker gold, and rising interest rates, the platinum trade continues to throw off bullish signals. However, it could be difficult for Platinum to avoid the big picture outside market selling of physical commodities if the debt ceiling negotiations break down. From a technical perspective, the platinum trade seemingly backed off attacking the market following the washout last week potentially indicating a lack of aggressive bearishness when July platinum nears $1,050. While the technical condition of the palladium market is more constructive than in the platinum market, the fundamental picture in palladium is significantly more bearish than in platinum.
GOLD / SILVER
Gold and silver prices remain in a liquidation watch, with silver breaking out down early and gold also nearing a downside breakout in the early going. In addition to strength in the US dollar, the metals are also undermined from an upside breakout in US treasury yields. Adding to the interest rate pressure on gold and silver prices are comments from the J.P. Morgan CEO who suggested investors should prepare for a 6.75% Fed funds rate. In a positive development, Indian gold demand reportedly showed some improvement in the wake of recent price declines. On the other hand, the Indian Rupee on Monday fell to the lowest level since mid-March and that could rob the gold market of Indian bargain-hunting buying. In short, Indian buyers look to remain price sensitive. Going forward we think it is also possible that gold and silver will not see flight to quality buying later this week if debt ceiling talks fail. In fact, the US debt ceiling conundrum continues to put upward pressure on US treasury rates, and one could conclude that global investors are set to demand higher yields in exchange for the added risk of a deterioration in the “full faith and credit” of the United States.
With a risk off vibe flowing from international equity markets, another large daily LME copper warehouse stock inflow and negative comments on the Chinese economy from the PBOC the downside breakout extension overnight is justified. In fact, a financial report from the Peoples Bank of China indicates economic development is experiencing headwinds from demand contraction and an unexpected downturn. Another negative short-term/positive long-term development came from Goldman Sachs lowering its 2023 average copper price estimate by roughly 10%. However, Goldman ultimately expects copper prices to reach $10,000 per tonne over the coming 12 months. Unfortunately for the bull camp, daily LME copper warehouse stocks have now increased for 22 consecutive trading sessions adding oversupply fears to fresh Chinese copper demand concerns.
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