GOLD / SILVER
The overnight buzz for the gold trade is focused on US bank sector concerns again with First Republic Bank teetering on failure. In other words, a measure of flight to quality buying interest has boosted gold and in turn has provided spillover lift to silver, platinum, and palladium prices. Unfortunately for silver bulls yesterday silver ETF holdings saw an outflow of 1.3 million ounces which continues a pattern of significant volatility of investment flows. Today’s US initial claims readings could rekindle renewed uncertainty toward the US economy as recent weeks have seen those filing for weekly jobless claims running about 20,000 above the levels seen in January and February. As indicated already, we see silver poised to outperform gold as investment interest returned aggressively following a single day injection into silver ETF holdings of 8 million ounces on Tuesday. However, we also think silver ETF holdings will continue to show significant volatility but the single day inflow of 8 million ounces earlier this week is a signal of surging investment interest in a market not used to seeing heavy investor participation! We also think any improvement in US economic psychology and/or simply less angst toward the US bank sector should allow silver to benefit from improved physical and industrial demand prospects.
PALLADIUM / PLATINUM
As in other precious metal markets volatility of daily movements in and out of PGM ETF holdings has expanded greatly as if investors are now “trading” precious metal derivative instruments. Yesterday platinum ETF holdings declined by 12,493 ounces which is a single day outflow of 0.4% of total global ETF holdings. Nonetheless, platinum ETF holdings year-to-date are still up by 6% and have total holdings of 3.2 million ounces! Open interest continues to climb with volume tapering off on the retrenchment in prices early this week which in our mind leaves the technical edge with the bull camp. Furthermore, other short-term technical indicators like RSI have corrected and given respect for consolidation low support (generally respected) of $1094.90, platinum should have a base from which to work higher from. In the palladium market, we expect a small measure of spread reversal action to provide support to palladium.
COPPER
The copper market starts the Thursday US session out with a lower low and the lowest trade since the beginning of January in action that indicates confidence in the Chinese economy has waned. Apparently, disappointing industrial profits in China in the January through March timeframe has disappointed the trade, at the same time the market sees slower copper fabricating activity in China as another sign of weakness in the economy. However, the Chinese government is apparently poised to provide subsidies to companies hiring recent college graduates. Chinese government officials have a target of creating 12 million urban jobs this year an increase of 1 million from last year. Unfortunately for the bull camp the bearish tilt in the copper market was not tempered by reports yesterday of Chinese government support for its export industries. Fortunately for the bull camp rising industrial material prices in China and very positive Indian macroeconomic signals help offset disappointment in the pace of the Chinese recovery and partially offset fears of softening in the US economy. Today the US will release weekly initial claims and another weekly increase in those figures could foster US slowing fears which could allow July copper to proceed back to the January pivot point of $3.75.
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