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The Bear Retains Control


While the gold market is trading in positive territory in the early action today, we see a lot of red ink on the quote screen in commodities this morning which might be a response to hawkish dialogue from the Fed’s Williams and Kaplan yesterday afternoon and from a decision to scale back some monetary support from the EU. Unlike the gold market, the silver charts still favor the bull camp with uptrend channel support in the December contract from the August low pegged at $23.58.


Fear that the chip shortage will continue to plague the auto industry through the end of the year has clearly resulted in the massive washout in palladium prices this week and that washout likely caused palladium ETF investors to scramble to the sidelines yesterday with 13,932 ounces flowing out for a single day decline in holdings of 2.5%. The platinum and palladium markets have showed divergent price action, but yesterday the declines in platinum were likely largely the result of significant declines in the palladium market.


The copper market appears to have found some buying interest this morning after overnight dialogue suggested the Chinese government may have to scroll back its failed attempts to squelch strength in raw material prices as their efforts might have contributed to a 13 year high in factory gate inflation in the month of August. Copper is also likely seeing spillover lift from surging aluminum and nickel prices, and we suspect a modest amount of short covering/profit-taking has been seen this morning after prices fell below $4.25 yesterday.

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