Written Commentary
PALLADIUM / PLATINUM
We see the platinum market vulnerable to more corrective action following yesterday’s new high for the move and poor close. In fact, a significant range up reversal in platinum yesterday probably forged a temporary blowoff top. Furthermore, the potential for another sweep of soft US economic data today could see platinum prices extend yesterday’s slide. However, platinum ETF holdings saw a significant inflow yesterday of 4,390 ounces and are now 1.6% higher year-to-date. With June palladium posting a 5th straight day of lower highs and lower lows this morning, macroeconomic sentiment deteriorating and a noted ETF outflow overnight of 1,247 ounces the path of least resistance is down.
GOLD / SILVER
Predicting the ultimate direction of gold and silver prices later today will be extremely difficult as we get the impression the trade is poised to shift its focus again. In our opinion, gains early in the week were correlated with economic uncertainty caused by clear slowing from report evidence in the US. However, just as equities shifted their focus away from bad economic news which is good for stock prices, gold and silver have also faltered following signs of slowing this week. Some will suggest that the moderation of inflation fears has prompted a quasi-top in both gold and silver prices, and we suspect that is partially the case. Certainly, a portion of the trade sees a silver lining in recent slowing data and has turned bullish off the theme that the global interest rate hike cycle is complete for now. It should be noted that the Reserve Bank of India overnight surprised the trade and left interest rates unchanged after 6 straight rate hikes. Certainly, falling treasury yields signal money flowing away from precious metals into a non-inflationary flight to quality instruments, but until the trade sees US jobs data on Friday and sees the monthly US PPI/CPI reports net week, we would not officially kill the inflationary threat. Gold should be supported from news that UBS raised its long-term gold price target by $100 an ounce. Nonetheless, we sense vulnerability in both gold and silver primarily from a technical perspective given the very aggressive gains forged at the beginning of the week.
COPPER
In addition to an oversold condition from a 5-day slide of nearly $0.20 copper found buying interest overnight from a better-than-expected Chinese Caixin services PMI reading for March. Therefore, one would think the copper market will be less vulnerable to disappointing US jobs related data over the next two days. However, the overall tone flowing from the global economic outlook has undermined views toward physical commodity markets this week despite growing views that the central bank rate hike cycle has been completed. A minor addition to the bullish track this morning is an 11.9% upward revision in a Chilean Central Bank 2023 copper price forecast. Clearly, a Chinese holiday/festival earlier this week produced reports of anemic demand in China which in turn prompted views that downstream purchasers of copper in China were skittish.
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