PALLADIUM / PLATINUM
While the sharp April rally in platinum prices is partially justified by improving Chinese demand prospects, the April low to high rally of $106 (especially with yesterday’s very aggressive range up move) leaves the platinum market vulnerable to further declines today. In fact, even platinum stocks rallied aggressively yesterday indicating broad-based bullish sentiment toward the sector and that should add a measure of corrective pressure to the sector today as those gains are reversed. However, Chinese demand expectations are not reversed or eliminated by overnight events, but profit-taking is justified and is likely to extend. Yesterday Anglo-American Platinum shares posted a 13% gain with Stillwater gaining 9.2% and Impala platinum rising 9%! In conclusion, negative big picture macroeconomic pressure has control today and in turn has erased the benefit of a 9195-ounce inflow to platinum ETF holdings yesterday.
GOLD / SILVER
Clearly, a much hotter than expected 10.1% annualized inflation reading from the UK has whipped up rate hike fears again and that in turn has fostered a surprisingly significant risk off reaction throughout the markets. Therefore, the slide in gold and silver prices is not surprising but the magnitude of the decline feels over exaggerated. However, in addition to the bearish fundamental catalysts both gold and silver violated key chart support levels likely adding a cascade of stop loss selling orders. Fortunately for physical commodities markets the catalyst driving prices down overnight is likely to dissipate later this week but is likely to present follow-through selling until solid chart support levels are encountered. However, with China posting favorable economic readings the most important physical commodity market is recovering from the extended Covid lockdowns and Chinese buyers are likely to begin bargain-hunting buying once prices become deflated. In conclusion, we remain bullish for intermediate and longer-term prospects but see both gold and silver remaining vulnerable to even lower action.
While the copper market should see pressure from the noted deterioration in global economic sentiment, the copper market usually focuses heavily on the ebb and flow of Chinese copper demand expectations. It should be noted that J.P. Morgan raised its China 2023 growth projection to 6.4% with signs of the ultra-important Chinese property sector revitalizing. After all, the increased prospects of 25 basis point hikes by the US Fed and the Bank of England are not the end of the world. In fact, LME copper warehouse stocks are approaching 18-year lows with supply concerns stoked further by lower quarterly copper production at Antofagasta. It should also be noted that Anglo-American copper production guidance for the coming 3 years in Chile was forecasted to be unchanged leaving supply tightness in place.
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