While the gold market failed to set a fresh high for the move overnight, prices managed to consolidate above $1,750 and settle below this week’s high. Similarly, the silver market has continued a sideways consolidation near $19.00, hitting a semi-double low of $18.65. However, funds continued to be withdrawn from gold and silver ETF holdings, with a sizeable outflow of 145,509 ounces of gold and 1 million ounces of silver yesterday. Surprisingly, gold mining stocks rallied along with gold futures prices yesterday, suggesting that investor sentiment is not entirely bearish. Despite the Dollar Index’s failure to make a new contract high and a sharp drop yesterday, the uptrend shows no sign of slowing down from a fundamental perspective. Economic uncertainty from the ongoing war in Europe and talk of OPEC+ production cuts have increased the appeal of US gear, which should put even more money into the dollar. With quality positions not benefiting from gold and silver’s apparent flight over the past eight months, we hesitate to suggest traders go long in these markets. If the source of yesterday’s gold rally was a flight to quality interest rates, yesterday’s inflow of funds into ETF holdings should have confirmed that, but it wasn’t. Unfortunately for Bull Camp, the flight to quality buys isn’t justified by a strong one-day reversal. October gold held Monday’s lows yesterday, and trading volumes failed to pick up by falling off the mid-month highs, which usually occurs when fundamental value is found. We like to sell the rally to the 6-month-old October gold downtrend channel resistance line to $1,797.75 with Friday’s short entry price falling to $1,792.85. The silver market clearly did not benefit from yesterday’s rally as much as gold, which we attribute to a clear pattern of falling ETF holdings. We prefer to sell silver in September on the downtrend channel resistance line, drawn today from the April and August highs of $20.37, falling to $20.23 by Friday.
The palladium market has clearly priced in Russia’s forecast of a deficit of 80,000-100,000 ounces by the end of the year as the market was unable to stay positive yesterday. According to an independent Russian analyst, demand for palladium is expected to fall in the second half of the year, but a reduction in production is likely to reduce supply further. The Russian analyst also forecast a global palladium market deficit of 130,000 to 150,000 ounces in 2023. In the near term, the palladium market is uninterested in “potential” tightness in the future and is instead being undermined by a deterioration in near-term economic sentiment. September Palladium has incredible support at $1,947. The outlook for the platinum markets also remains bearish from a chart perspective and broadly neutral from a fundamental perspective. While the platinum market has not faced typical forecasts of a slowdown in global auto sales, the decline in global economic sentiment suggests that a weaker forecast for vehicle sales is likely ahead. Earlier this week, Commerzbank lowered its year-end price forecast for platinum by $50 an ounce, which we see as a reduction in physical consumption estimates. Incredible support on October’s Platinum sits at $855.60.
Market ideas: Those wishing to go short gold and silver should allow the market to correct oversold positions from the mid-August highs of $75 for gold in October and $2.15 for silver in September. We prefer to sell silver in September when it returns to the downtrend channel resistance line drawn today from the April and August highs of $20.37. The resistance/sell level dropped to $20.23 on Friday.
Slowing upside momentum gives the bull bias a slight advantage
Surprisingly, the September copper contract broke yesterday at its highest level since June 30th, managing this strength on notable stock losses, a temporary upward breakout in US Treasury yields and a new contract in the US dollar. Goldman Sachs failed to rebound in the market despite downward 3-month, 6-month and 12-month price forecasts. They have been bullish on copper since mid-2023, suggesting the global structural deficit would not be resolved by then. From a technical perspective, the bull camp has been fueled by a slight adjustment in trading volumes over the past four trading sessions. There was limited development from a major Polish manufacturer (KGHM) suggesting its July sales fell 10% yoy. Yesterday’s new highs on generally weak PMI data and ongoing China bearish fears reinforce the view that the market found value at a low of $3.60 on Monday.
Market ideas: While we wouldn’t argue against another tough battle in copper prices in September, macro conditions are giving it a sudden jolt towards the recent consolidation low of $3.55. With mounting fears over Friday’s Federal Reserve talks, an open pattern of soft global PMI data and a rebound from last week’s lows around $0.20, risk and reward are unattractive for new long positions.
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