Written Commentary
GOLD / SILVER
Apparently, an avalanche of very disappointing global economic data overnight has not provided economic uncertainty flight to quality buying of gold early on and perhaps more importantly has not sparked long interest in the US dollar. Perhaps the gold and silver trade is seeing growing recession fear and expectations of further slowing of physical demand. Yesterday’s bearishness is also accentuated by World Gold Council predictions of softening Indian gold demand in both the June and September quarters. Additional bearish news from the WGC that Indian first quarter gold demand declined by 17% and India scrap gold inventories jumped by 25% in the first quarter. Unfortunately for the bull camp, the World Gold Council also indicated that global gold demand fell in the first quarter of 2023 despite strong ongoing central bank demand. First quarter gold demand fell by 13% compared to year ago levels and that contraction would have been very severe if central bank purchases of 228 tons were not registered. Apparently, first-quarter global central bank purchases were the strongest first quarter readings in 3 years with another highlight for the bull camp seen from Chinese jewelry demand reaching the strongest level since the first quarter of 2015. Another countervailing force to the decline in global gold consumption in the 1st quarter is the highest first quarter gold bar and gold coin purchases by the US since 2010. From a technical perspective, the sharp range up rallies and subsequent setbacks this week hint at a temporary top in gold and silver. However, concerns toward regional US banks continue to burn in the headlines with share prices plummeting this week and the press hyping and hoping to discover the next tenuous situation.
PLATINUM / PALLADIUM
In addition to further deterioration in global macroeconomic psychology yesterday, the PGM markets today should be discouraged by soft Chinese services PMI data and by evidence of soft first quarter global gold demand. In fact, Platinum bears should be emboldened by disappointing European economic data released overnight and by the failure to hold the key chart support yesterday at $1,046.70. Unlike the palladium market (which holds a massive net short), the last net spec and fund long position in platinum was near the highest levels in 14 months and therefore the propensity for the market to continue to experience aggressive stop loss selling is solid. While demand fundamentals for palladium are even worse than for platinum, the palladium market is not overbought from weeks and months of strength and the market likely holds a record net spec and fund short! Furthermore, inflows to palladium ETF holdings continue with the year-to-date gain of 8.7% becoming a material impact on the world supply and demand balance in the palladium market.
COPPER
All things considered, seeing copper prices track minimally lower this morning in the wake of a 2nd day of disappointing Chinese PMI data (weaker services PMI) might indicate the market has found a value zone just above $3.80. In fact, Shanghai copper warehouse stocks this week declined by 2,176 tons and the Chilean Mining Minister has raised copper price forecasts by $0.05 per pound. The Chilean mining minister indicated the upward revision in their price forecast levels is predicated on a shift into a global deficit condition brought on by 5% plus growth in China. The bull camp is also seeing support from a weaker dollar and from a relief bounce in global equity prices! Unfortunately for the bull camp LME copper warehouse stocks posted an 11th straight day of inflows. Obviously, today’s US jobs report will be a fresh input on the probable direction of the global economy and a combination of US recession fear and further escalation of US bank sector problems could result in a failure of $3.80.
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