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Slowing Fears Threaten Deflation Selling


While the gold and silver markets are higher this morning, we get the impression the initial action today feels like a “bounce”. However, some traders are suggesting that the potential for sustained flight to quality buying remains high in the event that weekday infections surpass 40,000 per day. While the gold and silver markets can change their focus instantaneously, it appears that the current focus is on the threat of slowing of the recovery because of the potential for a return to restricted activity.


The palladium market continues to damage its charts with the market unsure of the infection situation inside China and fearful that infections outside of China could at any time spark a multi-day downdraft in most physical commodity markets like palladium. Even though the platinum market came into significant favor last week, it has reversed course aggressively in a fashion that is likely to push further weak handed longs to the sidelines.


In addition to the threat of Chinese dumping, the copper market is back into a potential demand destruction environment in the face of a reemergence of surging infection case counts. As indicated already, we have not seen specific infection numbers from China but in the event their infections are also rising precipitously, and fresh isolation orders are seen anywhere in the world, that could be justification for a significant extension of this week’s poor start.

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