Written Commentary
GOLD & SILVER
With a flurry of positive developments the initial gains in gold and silver prices today are unimpressive and indicative of markets lacking sustainable bullish interest. In fact, prospects for additional Chinese stimulus, a relaxing of Chinese Covid restrictions, progression toward a G7 ban of Russian gold, a higher Goldman gold price target, and a slight decline in the dollar this morning should have given prices a bigger jolt. However, holding back gold and silver prices are rising US treasury yields (following dismal demand for auctions yesterday) and a 5th straight day of outflows from gold ETF holdings.
PALLADIUM & PLATINUM
While we give the edge to the bull camp from a pattern of higher lows and higher highs, fundamental guidance for palladium remains cloudy. It is possible that buyers are hopeful the G7 will eventually ban Russian PGM supply, especially after the carnage resulting from Russian missiles hitting a shopping mall in Ukraine. On the other hand, we think Russia maintains full capacity to export palladium supply to the world market, even if Russian supplies are officially banned by G7 members. In short, smuggling and rerouting through countries not participating in Russian embargoes is probably discouraging some speculative buying.
COPPER
This morning’s upside extension is fully justified by a lessening of Chinese Covid restrictions, hints of Chinese stimulus and spillover risk on sentiment from higher equities. However, it goes without saying that part of the gain this morning in copper is the result of aggressive short covering from a massively oversold market. While not a widely held view some buying might be the result of speculation that G7 countries might widen their embargo net against Russia with restrictions on copper.
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