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Slight Upward Bias as Dollar Declines


While the dollar has continued sharply lower overnight, gold and silver prices have managed only moderate rallies. While gold and silver managed to extend the recovery off last week’s lows in Tuesday’s trade, the rallies were carved out on declining open interest and low volume which suggest the rally is built on anemic sentiment. On the other hand, with the dollar falling precipitously this week, sellers of gold and silver are likely buying back those positions which in turn lowers open interest.


The PGM markets showed divergence Tuesday with the palladium market significantly overbought from a technical perspective and undermined because of a lack of fresh incendiary developments involving Russia. It should be noted that Norilsk Nickel Global Palladium Fund launched a new financial instrument involving physically backed electric vehicle metals, and that could result in a jump in investment demand for palladium which in turn could artificially tighten supply. The platinum market is generally uninteresting at present as it is an off market with respect to the threat against supply from Russia.


We are surprised with the magnitude of the rally this week in copper especially considering the Chinese are on an extended holiday. However, further weakness in the dollar and continued risk on sentiment flowing from equities has helped shore up copper demand views. Furthermore, LME copper warehouse stocks have now declined for an 8th straight session which in turn revitalizes the argument of tightening global supplies. While it could be a longer-term impact on prices, reports that the Chilean government is debating nationalizing the copper industry should be seen as a major threat against supply.

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