GOLD / SILVER
We suspect gold is benefiting from the prospects of further declines in the dollar despite the dollar pausing at 103.275 which is now a triple low/key pivot point. Looking ahead, the gold market is likely to break out of the trading range with critical inflation readings from the US tomorrow which could have a huge impact on the Fed’s rate decision on Wednesday. Another issue that could result in a chain reaction of volatility is this week’s US quarterly refunding of its debt, with treasury bills, 10-year treasury notes, and 3-year treasury notes scheduled to be auctioned today. While the gold and silver trade lacks definitively positive classic bullish themes, the charts in the dollar indicate more declines are ahead and that should increase the odds gold and silver will respect consolidation lows. Unfortunately for the bull camp, the latest spec positioning in gold shows net spec and fund readings in the upper portion of the last 13 months range thereby leaving the market vulnerable to stop loss selling. Looking ahead, both gold and silver will be presented with a wave of global inflation reports which should prompt a wave of volatility. On the other hand, the very impressive upward track on the silver charts was extended on Friday with recent gains coming on good trading volume and a rise in open interest.
PLATINUM / PALLADIUM
The platinum market should see support from a forecast last week from J.P. Morgan predicting Russian platinum production will decline by 2% relative to year-over-year levels and that platinum will register deficits in the next 2 years of approximately 660,000 ounces. Unfortunately for the bull camp, the platinum trade has been without positive Chinese demand news and strong inflows to platinum ETF holdings earlier in the year have moderated and possibly reversed. Unfortunately for the bull camp the net spec and fund position in platinum remains elevated despite the high to low decline last week of $51. Without global equity markets starting out on a positive footing and without an official Chinese stimulus announcement it is possible that July platinum will temporarily trade below a recent key low of $997.40. With a very large range down failure at the end of last week, the palladium market has little in the way of near-term support from the charts. However, the palladium market could become oversold quickly with a large net short from the last COT report right on the old record short from April 11th.
COPPER
In addition to an overbought condition from the late May and early June low to high rally of $0.29, the most recent COT report in copper showed a moderate reduction in what has been a significantly oversold condition. However, we do not think the market has run out of stop loss buying fuel given the much larger than usual net spec and fund short readings over the last month. Fortunately for the bull camp, LME copper warehouse stocks have seemingly returned to a daily outflow pattern and Shanghai copper warehouse stocks have also shown signs of returning to a pattern of weekly outflows. The market will likely take some direction from a Chinese New-loan report which at present does not have a scheduled release date.
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