Written Commentary
GOLD / SILVER
We suspect that the sharp rally in gold and silver is partly the result of risk on and hope for constructive talks between Ukraine and the Russians as a reduction in global anxiety could head off slowing/stagflation and allow inflation to gather pace. Certainly, the downside extension in the dollar, a wave of short covering interest, and a $3 plus rally in crude oil adds to the bullish equation this morning. In retrospect, gold and silver were clearly under pressure yesterday as result of the US shift to a cycle of higher interest rates, but that headwind for precious metals is at least quantified.
PALLADIUM / PLATINUM
With palladium spec and fund long positioning in the last report nearly flat, and prices into the low this week declining by $658 from the report that could put the net spec and fund short in palladium at the largest level since January. Therefore, the market’s ability to consolidate above $2,350 for most of this week could result in a short covering wave like gold and silver this morning. As in the oil market, sanctions on Russian exports were put on very fast and might only beginning to reduce flows in the weeks ahead to prompt a real impact on global commodity pricing. Like other markets lifted aggressively by the Russian embargoes, the palladium market has already removed a large portion of its war premium.
COPPER
While it appears that the May copper contract forged a significant bottom with the spike down on Tuesday, a possible end to fighting in Ukraine probably won’t be a sustained force for higher copper prices. However, the copper market should return part of its focus to Chinese copper demand, especially with Covid headlines remaining negative. Fortunately for the bull camp, the largest Chinese commodities producer showed a net revenue increase of 40% in January of surging refined copper output and that provides a modest demand lift.
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