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Positive Shift in Platinum

PLATINUM / PALLADIUM

Last week was a disastrous week for the bull camp in platinum as prices disintegrated in the face of what should have been a dramatically bullish supply and demand forecast from the World Platinum Investment Council. In fact, the Council predicted a 1-million-ounce deficit in platinum supplies this year. However, in 2021, the world platinum market had a surplus of 1.1 million ounces thereby mitigating some of the potential tightness concerns in the market this year. According to the Council, electrical shortages in South Africa will combine with demand growth to produce a deficit which will likely become very important at some point in the future. Unfortunately for the bull camp, the near-term outlook is plagued by bearish market forces in the form of ETF liquidations, a surging US dollar, spillover selling from gold, rising interest rates and unending concern for the Chinese economy. However, this morning the outside environment has shifted positive, and the oversold condition of platinum should foster a temporary bounce. Last week platinum ETF holdings declined by 20,371 ounces reducing the year-to-date gain to 3.1%. Like the platinum market, the palladium market continues to face many bearish big picture macroeconomic influences, but the trade is less concerned about supply shortages and rotation from palladium to platinum in industrial processes this year presents a conclusively bearish outlook.

platinum bars

GOLD / SILVER

While the headlines overnight from the press suggest that gold and silver prices are higher this morning off speculation of hot inflation from the US later this week, we suggest that is an overstatement or not the case yet. At least recently the major focus of the gold trade has been the direction of the dollar with the direction of treasuries periodically taking control. Therefore, seeing the dollar correct after extending its uptrend last week some gold and silver bulls are hopeful the dollar will have trouble extending the upward pattern in the coming week. While the US Fed decision is still more than a week out, Fed dialogue and US inflation data will be given added importance as the trade attempts to predict the outcome of the September 20th Fed meeting. Expectations for the Wednesday US CPI report call for a gain of 0.5%, which is an inflationary reading! However, at the end of last week, the CME Fed Watch tool was still registering a very high 93% probability the Fed would not change rates next week. We suspect the Fed will see inflation evidence as more important in their rate decision than the status of the US economy for at least one more meeting. Like gold, the silver market is likely to remain under pressure from several outside market forces and threatened internally by concern of slowing physical demand because of uncertain global economic activity. In conclusion, many internal and external forces are bearish and will be difficult to reverse.

COPPER

As goes the Chinese economy, goes the copper market! Overnight market sentiment turned positive toward the Chinese economy following a series of fresh Chinese policy changes designed to stimulate the economy. However, the market is also lifted because August Chinese new bank loans jumped more than expected. There are also reports on the ground of increased retail activity in China and China relaxed regulations for insurers to invest in the stock market. Furthermore, two major cities in China eliminated all curbs on home purchases to attract buyers and in turn pull the Chinese property market out of stagnation. However, there are residual bearish fundamentals likely to slow short covering fueled gains with significant a pattern of increases in both LME and Shanghai copper warehouse stocks, signs of increased production in South America, perpetual daily concern for slowing Chinese copper consumption and the typical wave of bearish outside market influences of rising rates, bearish currency market action and concerns of a US Chinese trade war.

 

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