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Bias Down on Looming Rate Hike


Apparently, the significant setback in the dollar at the end of last week, combined with the full take-away of the World Gold Council first quarter outlook spurred the significant recovery rally off last Thursday’s low on Friday. However, June gold surrendered $25 from the Friday high and has been pummeled this morning producing clearly negative charts. The gold and silver trade are also undermined because of expanding economic concerns toward China, as lockdowns in China and “other cities” and are hammering economic activity. Clearly, sentiment in the gold and silver trade is starting to shift to the FOMC meeting with rate hike fears rekindling. Adding into the negative outside market influence is a sharp recovery in the dollar and higher rates thrown off by treasury futures.


Despite the significant washout in US equities last Friday, reversal down action in gold late, and significant downside action in silver, palladium continues to hold in a short-term uptrend channel. While the gains since the last positioning report likely narrowed the net spec and fund short, the palladium market obviously retains bullish classical supply and demand fundamentals. In a very surprising development, the platinum market came alive last Friday and seemingly tracked with palladium. Fortunately for the bull camp, the latest positioning report in platinum remains minimally net long after a significant liquidation of the long last week after the report.


Clearly, the copper market has come unhinged because of the expansion (not contraction) in Chinese lockdown conditions. In fact, several analysts this morning predict both copper and iron ore prices have further downside to factor in increased and ongoing Chinese economic headwinds. Apparently, the Chinese economy was already slowing from initial lockdown efforts with PMI readings dropping from 48.4 in March to 41.9 in April. Even smaller manufacturing companies were hit with the Caixin manufacturing PMI reading falling much more than expected.


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