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In Metals, Inflation Fighting Confidence


In addition to a broad-based risk off environment flowing from poor tech sector earnings, commodity markets are under additional pressure because of fear that a flurry of central bank meetings today will yield increased concerns of inflation which in turn could result in higher rates. While gold and silver managed gains on Wednesday in the face of fresh evidence of inflation, the gains were undersized relative to history. In other words, gold and silver are not embracing the inflation potential in the marketplace yet, with a portion of the market still confident in the Fed’s ability to rein in inflation before it begins to spiral upward.


The bear camp will suggest the palladium market has stalled while the bull camp will suggest the market is balancing its overbought condition with a sideways consolidation over the previous 5 trading sessions. The Russian situation continues to add uncertainty to the markets, with the Russian President yesterday apparently orchestrating several commodity supply disruptions to turn up the pressure on his international adversaries. In the platinum market, a major producer (Impala Platinum) showed its gross concentrate volumes in the first half decreased by 4% on a production level of 1.6 million ounces.


With a trading range this week of $0.23 (mostly from gains), China on holiday, fears of central bank tightening dialogue and a broad-based risk off environment to start the path of least resistance in copper is down. In fact, the copper market made significant gains yesterday despite news that a major Chilean copper mining company saw its production increase by 12.9% in December over year ago levels and that alone leaves the market vulnerable to corrective action.


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