Corrective action not a change of trend Yet!
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
GOLD / SILVER
What a difference 24 hours makes, as the gold market this morning is reportedly trading lower off less concern for the Omicron breakout. Yesterday, gold and silver were lifted off a decline in Omicron uncertainty.
However, a pandemic record daily US infection count of 441,000 from Monday seriously challenges the declining this argument. It could take confirmation of a less serious medical outcome from Omicron, strong US scheduled data, and/or a resumption of strong gains in equities to push the dollar into a downside breakout and spark gold back toward $1,825.
Furthermore, the charts have shifted from positive to negative, with gains from earlier in the week completely reversed and prices as of this writing sitting $21 below yesterday's high.
In a negative for the precious metals and many other commodities, Bloomberg has released a leading economic indicators study of the Chinese economy that expects December to show only moderate growth. Adding into the bearish shift is a four-day high/reversal in the dollar, which could have the capacity to rally 40 more points before encountering substantial resistance. The 200-day moving average in gold today is $1,800, while uptrend channel support is seen closer-in at $1,805.50.
Unfortunately for the bull camp in silver, the market forged a massive, 48-cent trading range yesterday, spiking higher and closing just above its low of the day. With the $23.00 level violated on the downside early this morning and prices sitting $0.40 below yesterday's highs, a logical drift lower to $22.90 is expected.
While the palladium market forged a significant $136 trading range on Tuesday and finished near its high of the day, prices have fallen back this morning within striking distance of a key pivot point of $1946.50. Perhaps the trade sensed continued deflation of Omicron fears and/or the PGM markets yesterday saw the prospect of Russian interference in Ukraine as a high probability.
On the other hand, Bloomberg projections of only moderate growth in the Chinese economy in December challenges demand hopes fostered over the past two weeks. It should also be noted that the recent COT report showed palladium to have a near record spec and fund net short position.
Pivot point support is seen at $1,956.90 with uptrend channel support pegged at $1,928.70. Not to be left out, platinum also extended its recent pattern of higher highs and managed to retain most of the gains into the close yesterday.
But the recent rally has been forged on a precipitous decline in open interest and falling trading volume, which is not sound bullish technical action. We see a pivot point at $971 and key support at $964 with near-term resistance/targeting at $1,000.
MARKET IDEAS: While we concede to a slight bullish bias in precious metals markets after the recent two-week rally, we are highly skeptical of the market's capacity to continue higher straight away, especially with a record daily US infection count from Monday but also because of the current non-descript economic conditions. Given significant range up reversal action in both gold and silver yesterday, the onus is on the bull camp to prove it can extend its gains.
Temporary sideways to lower action to balance overbought condition
Copper ranged up yesterday, reversed into the close and extended on the downside this morning in a fashion that suggests that $4.50 is an expensive level.
In a longer-term negative, the Chinese Industry Ministry has called for expanded domestic production of copper and iron ore. Apparently, copper joined the parade of commodities temporarily benefiting from market views that the Omicron threat was receding.
However, seeing the US on Monday post the highest ever daily infection count (441,000) clearly unnerves those who see it as a passing headwind. Furthermore, the market appeared to be disappointed with the magnitude of recent Chinese efforts to stimulate their economy, as the People's Bank of China lowered reserve rate requirements and increased liquidity and yet economic sentiment has not improved dramatically.