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Corrective Action Likely For Metals


While gold and silver have been benefiting from classic inflationary conditions recently overnight the bull camp has been unnerved by another spike up in US interest rates. Certainly, both gold and silver have pushed higher against headwinds of rising interest rates and a strong Dollar recently, but the rate rise has become too much too fast. A war related support for gold and silver is widespread belief that additional sanctions against Russia will likely exaggerate current inflation pressures.


Despite the launch of what is thought to be a major Russian offensive in southeastern Ukraine and given fresh expectations for additional sanctions against Russia, the palladium market is “down hard”. While the press overnight suggested that palladium ETFs were seeing growing investor interest, those inflows are isolated in a single ETF and total palladium ETF holdings are 0.6% lower year-to-date. While the PGM markets look to benefit from “classic” inflation conditions, negative outside market headwinds of rising interest rates and a strengthening dollar have become too strong for the bull camp.


With the copper market forging a 6-day low to high rally of $0.22, LME copper warehouse stocks jumping by a very large 8,150 tons overnight and interest rates spiking, copper is vulnerable to corrective action. Certainly, copper is underpinned because of positive Chinese GDP and industrial production readings Monday and a portion of the trade is expecting more stimulus from the Chinese government. Furthermore, the shutdown of Peruvian copper mines gives the bull camp confidence from supply issues.

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