Evening Metals: The Bear Camp Regains a Slim Edge
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GOLD/SILVER
Obviously, the gold and silver markets are under ongoing pressure due to expanding market consensus that interest rates are set to rise at some point in the coming quarter. The markets showed little in the way of support from a return to $80.00 crude oil prices but had almost no direction from the dollar index action in the first four trading sessions of the week. We suspect a large dive in bitcoin added to the selling in gold with bitcoin futures falling to the lowest level since September 29th. However, bitcoin has return to the vicinity of consolidation value level seen in late September and may not continue to weigh on gold prices. Another force gold and silver traders need to monitor closely is the action in treasury bonds with yesterday’s jump in yields reaching the highest since late March 2021. As we indicated several times over the last week, we were skeptical of the bull track given the markets pattern of “starting and stopping” short term trend action. It should also be noted that trading volume on this week’s slide increased while open interest hooked up suggesting the bears had trading interest in their favor. Sentiment toward the silver market also favors the bear camp with silver ETF holdings on Wednesday posting a 9th straight day of declines and bringing this year’s net sales to 1.8 million ounces.
PLATINUM GROUP METALS
The palladium market yesterday saw a range down move, but the trade quickly rejected that slide in at times the market was trading $51 above its low for the day. The brunt of palladium demand news this week was negative from claims, housing, and vehicle sales. Therefore, outside market pressure from gold and silver should keep the palladium market under pressure going forward. Obviously, initial, and perhaps unreliable support is seen at $1,818 with resistance at $1,924.50. In the near term we see palladium holding within a $2,000 and $1,800 trading range with the most likely breakout coming on the downside. It should be noted that a downtrend channel resistance line is seen today at $1,974.30 and a rise above that level could reverse a downtrend in place since last May!
MARKET IDEAS
We see the trend remaining in precious metal markets with palladium and gold likely assuming leadership roles. Key support in February gold is $1,798.10 and thin/unreliable resistance is seen at $1,833. Critical support in March Palladium is $1,818 and targeting is seen up at $2,000. Like the palladium market, the platinum market is also into a trading range bound by $950 and $1,000.
COPPER
“No trend” has become downtrend
While the March copper contract managed to reject an 11-day low yesterday, the market did reject a moderate portion of that slide leaving the $4.31 level as some form of value/support. However, the copper slide came in the face of positive Chinese services PMI readings for December and a renewed pattern of declining LME copper warehouse stocks. On the other hand, seeing US treasury yields jump to the highest levels since last March certainly increases concern of slumping housing and vehicle sales. Fortunately for the bull camp, the copper market maintains a relatively low net spec and fund long positioning. In fact, with March copper from the last COT report mark off declining by $0.12, we suspect the net spec and fund long has declined to the lowest level since June 2020.
COPPER MARKET IDEAS
With copper prices failing to benefit from positive Chinese schedule data released on Thursday, and a city in China reverting to lockdown, today’s weekly Shanghai copper warehouse stocks reading could be more important than usual. However, we see solid support at $4.31 with resistance pegged at $4.43, but we would not in her the long side of the market unless prices spike down below $4.30.