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Fundamentals Favor Bear Camp

GOLD & SILVER

While the upside breakout in the dollar this morning is not large in scope, the negative impact on gold and silver prices has been extended into another session. However, we suspect a large portion of yesterday’s aggressive washout in gold and silver came from the significant jump in US treasury yields and further gains in US yields are possible today. Not surprisingly, the jump in US rates and strengthening in the dollar was sparked by another round of solid US economic data. Therefore, traders should give today’s active US scheduled report slate added attention as positive data and any sign of declining inflation from the PCE report could result in a replication of yesterday’s range down moves in gold and silver.

Gold bull & bear

PLATINUM & PALLADIUM

While the platinum market has not posted a fresh downside breakout early today, prices sit within a few ticks of another breakdown leaving the charts bearish. Obviously, continued disappointment over the Chinese recovery has contributed a large measure of selling in PGM markets this week, especially with the latest data posting ongoing weakness in Chinese nonmanufacturing PMI readings. While it is way too premature to speculate on a regime change in Russia, a change in the Russian government could foster talk of softer sanctions which in turn could spark expectations of increased PGM supply flowing out of Russia. While the September palladium contract has shown some respect for the $1,200 level, the market looks to remain under Chinese demand following a soft Chinese manufacturing PMI result. However, the technical condition in palladium is diametrically opposed to the positioning in platinum.

COPPER

Apparently, the copper market anticipated disappointing PMI readings from China with the sharp declines earlier in the week as prices this morning are higher despite a downtick in Chinese nonmanufacturing PMI readings released overnight. However, it is possible the soft Chinese data overnight has further elevated hopes for additional Chinese stimulus programs. Even more surprising is copper’s higher trade this morning in the face of a 7,889-ton inflow to Shanghai copper exchange warehouse inventories.

 

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