GOLD / SILVER
With the dollar in the early action today matching 5-day highs in the early action, and upbeat global economic sentiment following strong Chinese PMI readings the early strength in gold and silver is justified. In another minimally supportive overnight development Russian gold miner Polymetal indicated their reserves declined with operations suffering indirect negative impacts from sanctions from the difficult in obtaining drilling equipment and other necessary mining materials. Obviously, gold, silver, platinum, and copper prices are being lifted this morning following better than expected Chinese PMI results which clearly bolstered hope for improved Chinese metal demand. The trade is also expecting additional stimulus efforts from this weekend’s Chinese National People’s Congress. While only a minimally supportive story (without actual proof of purchases), Bloomberg overnight indicates central banks are likely to continue to build holdings as they hike rates and sell bonds from their quantitative easing efforts. A Bloomberg story overnight also noted that current gold prices are “just above” levels where central bankers were inspired to purchase gold before. It is possible that increased tensions between China in the US (over the origins of the coronavirus) could provide minimal flight to quality buying of gold and silver, but there is an equal chance that severe escalation of US/Chinese tensions could be seen as a slowing threat against the world economy and in turn that cold dent gold and silver physical demand expectations. Not surprisingly, chart action in both gold and silver early this morning has shifted positive with 3-day highs and the markets regaining key chart levels in the early action. However, the US session will also bring an avalanche of US and Canadian PMI readings, with Germany and the US also releasing price (inflation) related measures. Expectations for German and US price data call for minimal increases which could produce negative but temporary weakness in prices.
PALLADIUM / PLATINUM
Given the impressive rally yesterday in platinum and significant upside breakout move again this morning, the bull camp should gain confidence especially with platinum yesterday forging a gain of nearly $60 per ounce off the recent low. In fact, into the high this morning the 3-day low to high rally in April platinum is now $66 with prices reaching the highest level since February 10th. Obviously, ongoing optimism toward the Chinese economy has served to lift platinum prices, but signs of improving investment demand recently are not to be discounted. In the end, we give the bull camp a minimal edge, but suggest traders monitor the ebb and flow of overall global sentiment as a meltdown in equities could catch platinum prices overbought.
Not surprisingly, given a sweep of positive Chinese economic data released overnight (a 10 year high in one reading) the sharp range up extension of the recovery action from the prior 2 sessions is justified. Adding into the bullish environment are expectations for additional stimulus efforts announces at this week’s National People’s Congress meeting and signs of Russian copper production difficulties from the inability to obtain necessary production equipment like diamond drilling heads. Furthermore, a more aggressive stance by the LME regarding the limiting of Russian copper supply flowing through its exchange system should provide supply side support for prices. Yet another positive demand issue from today’s US trade are expectations of favorable manufacturing PMI and construction spending readings from the US with a minimal negative offset potentially seen from an increase in US ISM manufacturing prices paid. Therefore, scheduled data prospects are slightly positive to copper prices especially given positive economic signals flowing from China overnight.
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