Written Commentary
GOLD & SILVER
At least to start today a precipitous downside extension in the dollar and general risk on psychology has given the bull camp the edge to start the new trading week. While many media outlets suggest the Chinese mortgage rate reduction is providing lift to prices this morning that development was already in the market last week. Unfortunately, for the bull camp, gold ETF holdings last week declined by 145,856 ounces and silver ETF holdings declined by 9.01 million ounces. In retrospect, the gold market performed very impressively last week in the face of threats of global slowing and unending central bank promises to stop inflation by reducing demand (slowing the economy). While the silver market also extended an impressive bounce off the May spike low, fear of slowing in China and the world tempers demand hopes.
PALLADIUM & PLATINUM
Apparently the palladium market is finally being threatened with lost supply from Russia, following reports that some metals traders are starting to shun Russian palladium supply. Since the war started the trade has discounted severe tightening with prices into the low last week sitting more than $200 or 10% below start of war pricing. Apparently, the lack of a specific palladium embargo on Russia was allowing supply to flow under the radar of the EU. We also suspect intensive smuggling is underway, but today’s headlines might spark greater focus on Russian PGM supply flows. The platinum market with the opening this morning has posted the fifth straight higher high for the move.
COPPER
In retrospect, the sharp reaction in copper last week was probably the result of a specific opening date for Shanghai, but the markets are also embracing last week’s Chinese mortgage rate cut and there is certainly a risk on vibe in place today. While it is too early to predict a trend, LME copper warehouse stocks have shown declines recently thereby revitalizing supply concern. An outside market positive for copper is a 2-week high in iron ore prices which are also thought to be tracking higher off the lifting of activity restrictions in Shanghai. In fact, copper premiums in China have firmed in a sign that smelting activities are expected to pick up pace. Another significant supply-side support is the prospect of ongoing production losses in Peru, due to local protests.
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