The tide has shifted down; more declines but not a shift in trend.
GOLD / SILVER
A much hotter than expected 10.1% annualized inflation reading from the UK has whipped up rate hike fears again, and that has fostered a surprisingly significant risk off reaction throughout the markets. The slide in gold and silver prices is not surprising, but the magnitude of the decline feels exaggerated. Both markets violated key chart support levels, which likely brought a cascade of stop-loss selling orders. The catalyst driving prices down overnight is likely to dissipate later this week, but it could bring follow-through selling until solid chart support levels are reached. China is posting favorable economic readings as it recovers from Covid lockdowns, and buyers there are likely to be bargain hunters once prices become deflated. Chinese gold demand has dominated Indian demand, but both nations are outperforming the global economy. Citigroup released a bullish gold price forecast earlier this week predicated on improving jewelry and physical demand in emerging economies, with gold price projections of $2,100 in the next 3 months and $2,300 in the next 6 to 12 months. We remain bullish for the intermediate and longer-term, but we see both gold and silver vulnerable to even lower action in the near term. However, even though the dollar is trading higher this morning, fundamental signals and the charts are not signaling a sustained reversal of the March-April downtrend, which should be of some consolidation to gold and silver bulls. Yesterday gold ETF holdings increased by 31,028 ounces. However, silver holdings fell nearly 3 million ounces, which could add pressure to the early washout in silver. Near term targeting and support in June Gold is $1,981.70, followed by $1,964.90. Similar targeting in May Silver is $24.69.
PGM
While the rally in platinum was partially justified by improving Chinese demand prospects, the size and suddenness of the move ($106 so far this month including yesterday's very aggressive range up move) has left the market vulnerable to further declines today in the wake of the overnight selloff. Even platinum mining stocks rallied aggressively yesterday, indicating a broad-based bullish sentiment toward the sector, and could add a measure of corrective pressure to the sector today as those gains are reversed. Chinese demand expectations have NOT been reversed by overnight events, but profit-taking is justified and is likely to extend. Yesterday Anglo-American Platinum shares rose 13% gain, Stillwater 9.2%, and Impala Platinum 9%. Negative macroeconomic pressure took control today and in turn erased the benefit of a 9195-ounce inflow into platinum ETF holdings yesterday. Holdings are now 2.7% higher year-to-date at 3.1 million ounces and are the highest in 12 months. Those 3.1 million ounces in ETF holdings are very significant considering annual production is just over 6.1 million. While percentage gain in palladium holds so far this year is larger than platinum at 5.7%, global palladium production is north of 10 million ounces per year and total ETF holdings are only 471,535 ounces. Corrective targeting in July Platinum is $1059.70 and possibly $1046.70 if the risk-off wave extends into tomorrow. With the palladium market showing very modest weakness this morning, it may not see as much corrective action. Initial support is pegged at $1562.
MARKET IDEAS: With a macroeconomic washout pressuring the commodities, the path of least resistance in gold and silver is pointing down. The source of the risk-off selling does not justify a sustained collapse, but traders should allow the selloffs to extend before attempting to pick a bottom.
COPPER
Global demand fear sparks selling, but Chinese demand should support.
While copper should see pressure from the deterioration in global economic sentiment today, the market usually focuses heavily on the ebb and flow of Chinese demand expectations. J.P. Morgan raised its China 2023 growth projection to 6.4% with signs that the property sector is revitalizing. The current track lower could offer a buying opportunity near consolidation support at $3.9820. Increased prospects for 25 basis point hikes by the US Fed and the Bank of England are not the end of the world. LME copper warehouse stocks are approaching 18-year lows, and supply concerns are being stoked by lower quarterly copper production at Antofagasta. Anglo-American production guidance for the coming three years in Chile was forecasted to be unchanged, which could keep supply tight.
MARKET IDEAS: Negative economic sentiment has removed chart support, and follow-through selling is likely. However, it should be noted that the most Commitments of Traders report showed a spec and fund net short of 349 contracts. This suggests that any stop loss selling could run its course quickly.
