Written Commentary
PLATINUM / PALLADIUM
As in other precious metal markets, the platinum market caved in off fears of slowing, tempering inflation prospects, higher interest rates, a firmer US dollar and disappointment in the magnitude of Chinese new loan demand. Fortunately for the bull camp, platinum ETF holdings continue to receive interest with year-to-date gains of 8%. Last week platinum ETF holdings increased by a very significant 43,628 ounces, with Friday alone adding 39,880 ounces which in turn is a 1.2% gain of total ETF holdings in a single session. Unfortunately for the bull camp, the net spec and fund long in the platinum market sits near the highest levels since March 2022 partially justifying the washout but potentially signaling the markets capacity to find solid support at a recent quasi-double low at $1,043.60. Not surprisingly, the palladium market saw a less aggressive liquidation than platinum and the rest of the precious metal markets last week. We attribute the relatively smaller losses in palladium to the heavy net spec and fund short the market has been maintaining consistently over the prior trading months.
GOLD / SILVER
With the significant jump in the US dollar at the end of last week, a new high in the dollar this morning, a slight rise in US interest rates and softer than expected Chinese new loan data last week, the commodity markets are facing signs of slowing instead of signs of out-of-control inflation. Fortunately for the bull camp, the recent correction in gold prices prompted fresh buying interest in India after seeing those buyers back off with prices above $2,020. Unfortunately for the bull camp, soft US scheduled data, strength in the dollar and global economic slowing fears leaves global gold demand expectations disappointing and leaves the bear camp with an edge with respect to demand fundamentals. While we suspect the gold market will continue to erode on its charts, we expect the market to generally respect support around $2,000. Like the gold market, the silver market saw inflows to silver ETF holdings last week of 2.91 million ounces resulting in a year-to-date gain of 0.6% While the net spec and fund long positioning in silver was not as overbought as gold on a relative basis recently, the market was long enough to justify last week’s late selling wave.
COPPER
As in most physical commodity markets, the copper market was very disappointed with the lack of positive forward momentum in the Chinese economy following a very discouraging new loan report. However, the copper market should be cheered by news of a Chinese central Bank liquidity injection and by the substantial decline in Shanghai copper warehouse stocks as they fell by 16,536 tonnes last week extending a streak of outflows. In other words, seeing warehouse stocks draw down over time should indicate industrial activity is beginning to draw down domestic supplies or is anticipating a winding up of activity. It should also be noted that a trade battle between China and Australia has resulted in a Chinese ban on Australian copper concentrate imports thereby removing a key source of supply for Chinese industrial activity.
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