METALS: Inflation Evidence Mounts but Metals Ultimately Fear The Fed
GOLD / SILVER
Despite a stronger dollar and modest declines in crude oil prices, the gold market sits near the highest level since March 14th in the early going today. The bull camp is obviously helped by another round of international inflation readings overnight. In fact, inflation evidence came from New Zealand, Great Britain, and Spain. We suspect that gold and silver are partially undermined because of soft Chinese import and export data as that insinuates a soft economic foundation. As indicated yesterday, we see the gold and silver gains this week as pure inflationary gains which are impressive considering they have been forged in the face of a litany of hawkish US Federal Reserve statements. In fact, the US Federal Reserve members are generally of a mind that two 50 basis point rate hikes are needed directly ahead. Therefore, it is a delicate balance for the gold and silver bulls to see inflation psychology ramp up at the same time the Fed is aggressively ramping up its resolve to head off spiraling inflation. However, some economists, fund managers, and Fed members saw the CPI core rate reading yesterday as a sign that inflation might be topping out. In another fresh negative overnight, Indian March gold imports fell sharply on a year-over-year basis, but that decline is outsized because of a strong pent-up bounce in Indian demand last year. While not a front burner issue early this week, Russian military activity is picking up pace with reports of a more aggressive commander stepping in to lead Russian forces. With gold and silver prices posting gains in the face of rising interest rates, stronger dollar action and significant weakness in energy prices, it is possible that buying is inspired by classic inflation anticipation. However, with follow-through gains today in the face of dollar strength, the bull camp appears to have more than one argument supporting their case. In what might be an indirect benefit to gold and silver bulls, yesterday's Treasury note auction demand was very poor despite yields in the vicinity of 3-year highs. From a short-term technical perspective, June gold has carved out a very impressive 5-day pattern of higher lows and higher highs leaving short-term trend signals pointing upward. Similarly, the May silver contract has also put together a very constructive chart pattern over the past 5 trading sessions with the setup pointing to a trade above $26.00.
PLATINUM
With the National Union of Mineworkers and the AMCU union expected to join forces to secure higher wages and better fringe benefits, South African gold, platinum, and palladium production is threatened, and prices should be underpinned. Apparently 35,000 workers are involved with the unions seeking a raise of 5%. So far, Sibanye-Stillwater indicates they have not received a formal notice to strike at the platinum mines. Unfortunately for the bull camp, last week's late rally and Monday's follow-through rally were forged on extremely low trading volume suggesting the bull camp currently lacks impetus. Key support in June Palladium is seen at $2,305 with a major support/failure point seen at $2,226. While platinum did not see support from the potential for strikes at Sibanye-Stillwater platinum mining facilities in South Africa, the market remains just above solid support of $950 on the charts and if workers down their tools that could result in an upcoming rally toward $1,050.</p>
TODAY'S MARKET IDEAS
While we would like to see gold and silver buying come alive with sharp sustained gains off classic inflation expectations, we remain very skeptical of that capacity given the rising chorus of Hawkish Fed statements. In fact, inflation data released initially this week has already produced very hawkish Federal Reserve comments and the trade has yet to encounter PPI readings. However, even without knowledge of the PPI result, trade expectations are now projecting sequential 50-basis point US hikes. Therefore, we suggest traders allow for a return to $2,000 in June gold and a return above $26.10 in May silver to purchase bear put spreads.
DAILY TECHNICAL COMMENTS
Note: Data is collected using the closing values of the previous session and calculations and analysis are run at the same time. Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. Data sources can and do produce bad ticks that can cause computation errors. Please verify before use.
COMEX GOLD (JUN) 04/13/2022: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The market's close above the 9-day moving average suggests the short-term trend remains positive. A positive setup occurred with the close over the 1st swing resistance. The next upside objective is 1998.2. The next area of resistance is around 1984.0 and 1998.2, while 1st support hits today at 1954.4 and below there at 1938.9.
COMEX SILVER (MAY) 04/13/2022: Positive momentum studies in the neutral zone will tend to reinforce higher price action. The intermediate trend could be turning up with the close back above the 18-day moving average. Market positioning is positive with the close over the 1st swing resistance. The near-term upside target is at 26.328. The next area of resistance is around 26.002 and 26.328, while 1st support hits today at 25.188 and below there at 24.699.
COMEX PLATINUM (JUL) 04/13/2022: The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. The close below the 9-day moving average is a negative short-term indicator for trend. It is a slightly negative indicator that the close was lower than the pivot swing number. The next upside objective is 997.15. The next area of resistance is around 979.80 and 997.15, while 1st support hits today at 952.80 and below there at 943.15.