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Inflation Brewing or Peaking?


While the April gold contract overnight forged a fresh higher high, the breakout was minimal, and the trade is short-term overbought into what could be the most critical economic release in years in the form of CPI. In other words, the gold and silver trade will have a test of the newfound embracing of inflation following today’s scheduled reports. Adding into the inflation focus this morning is series of hot price measures released overnight from Japan, Australia, and the UK.


While the palladium market did not forge a 3-day high overnight prices remain pinned near the highs into the early US trade. Therefore, the demand side of the equation has become paramount to the bull camp with the bulls also in need of a positive reaction to this morning’s consumer price index readings. The platinum market continues to hold within a $50 trading range with the trade potentially garnering light speculative buying from the inflation story later this morning. However, it is unclear what the platinum market’s reaction will be to the US CPI report as too much inflation could ratchet up hawkish interest rate sentiment while a softer than expected reading could reverse some recent buying of precious metals by those looking for an inflation hedge.


As of this writing, the cause of the substantial rally yesterday (at times $0.13) is not definitively known. However, we suspect a short squeeze of supply in London (or fear of a squeeze), a very bullish Goldman Sachs paper on commodities and an upward revision in a copper price forecast from Citi provided concentrated speculative buying. From the supply front, the Las Bambas copper mine in Peru is reportedly running at half of normal production levels, with no concentrate sent to the port since January 27th, because of roadblocks by local communities. In another bullish force, aluminum and iron ore prices continue to surge, with fundamentals in those markets setting the stage for even more gains.

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