METALS: The Bias Remains Down with Corrective Action Likely to Extend
GOLD / SILVER
Both gold and silver face a 2nd day of US Federal Reserve Chairman testimony to the US Congress where discussions of more aggressive and longer in duration tightening policy are expected to flow again. Unfortunately for the bull camp the dollar index has forged a higher high extension this morning following yesterday's sharp range up move thereby pulling currency-related pressure on gold and silver into another session. Not surprisingly, expectations for the March 21st/22nd FOMC meeting have boosted the odds of a 50-basis point rate hike and that should leave gold and silver in a general downward motion. In what might be a delayed reaction to recent declines in prices, both gold and silver ETF holdings continue to plummet with gold holdings yesterday shedding 226,383 ounces for a 6th straight daily decline and silver posting the biggest one-day decline (5.1 million ounces) in holdings since last September. In another minimal negative demand development, the Perth Mint indicated February gold sales declined while the sale of silver coins and minted bars increased. Apparently, the gold trade has a different opinion on what constitutes a noted amount of Chinese central bank gold buying, as a bullish story on Bloomberg yesterday regarding a 25-ton purchase from the Chinese Central bank had little supportive impact on gold which fell by more than $35 per ounce yesterday. Nonetheless, seeing the Chinese central bank buy 25 tonnes of gold last month and with that purchase the 4th straight month in a row of purchases that looks to be the beginning of a trend of reserve building by the central bank representing the world's largest gold consuming nation. In our opinion, reports that Chinese central bank gold reserves are roughly 2,100 tonnes are a wild guess, with the Chinese central bank likely building gold reserves consistently over the last several years in a bid to raise Chinese status in global financial markets. It should also be noted that the World Gold Council recently indicated that 2022 saw record central bank gold purchases and we see no reason to expect the "trend of buying" to come to an end as many central banks liquidate extensive bond portfolios. However, in the near term a strong dollar and talk of even higher rates should leave the bear camp in gold and silver with the edge.
PLATINUM
The lack of a noted recovery from yesterday's major range down washout in the face of very bullish overnight fundamental news highlights a prevailing bearish view toward platinum prices. Apparently, the World Platinum Investment Council raised its 2023 platinum supply and demand deficit to 556,000 ounces which is a significant jump from the deficit forecast of 303,000 ounces from November. While some may doubt forecasts of a 10% increase in automotive demand for platinum feedstocks, the WPIC also expects increases in platinum jewelry consumption, industrial demand, platinum bar and coin sales but expects exchange traded funds will reduce holdings by 132,000 ounces. However, so far this year total world platinum ETF holdings have increased by 2.6% on the year with an inflow yesterday of 7667 ounces! The WPIC also indicated platinum demand to produce glass used in heavy-duty mining vehicles will increase and perhaps more importantly that world mine supply will contract. The World Platinum Investment Council indicates that severe power problems in South Africa and sanctions against Russia are reducing the inflow of necessary mining equipment into Russian and those two issues should exacerbate the shortfall in supply. Certainly, the platinum market was short-term overbought from a 5 day $83 per ounce rally, but we suspect the revival of strength in the dollar and the promise of even higher terminal US rates combined with combined with technical selling for further correction of the late February early March rally. On the other hand, it is possible that a story indicating the potential for reaching peak gasoline consumption from the rotation to electric vehicles will cause some longs to run to the sidelines in the days ahead! Near term downside targeting is seen at $916 in April platinum. Fortunately for the bull camp in palladium, the market recovery off the late February spike low resulted in minimal short covering gains as the reversal in financial market conditions is likely to push palladium into a fresh downside breakout today.
TODAY'S MARKET IDEAS
We leave the edge with the bear camp as the 2nd day of US Federal Reserve Chairman testimony to Congress is likely to reiterate the need for a higher terminal US interest rate and potentially the need for a return to a "mega" rate hike later this month. Naturally the increased hawkish tone from the Federal Reserve chairman electrified the US dollar and that strength (and other lingering bearish gold and silver forces) is likely to extend the washout in prices today.
METALS TECHNICAL OUTLOOK
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 (APR) 03/08/2023: Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. The close under the 18-day moving average indicates the intermediate-term trend could be turning down. The market is in a bearish position with the close below the 2nd swing support number. The next upside target is 1867.8. The next area of resistance is around 1838.9 and 1867.8, while 1st support hits today at 1799.1 and below there at 1788.2.
COMEX SILVER (MAY) 03/08/2023: The daily stochastics have crossed over down which is a bearish indication. Momentum studies are declining, but have fallen to oversold levels. The market's short-term trend is negative as the close remains below the 9-day moving average. The market is in a bearish position with the close below the 2nd swing support number. The next downside objective is now at 19.305. Some caution in pressing the downside is warranted with the RSI under 30. The next area of resistance is around 20.724 and 21.525, while 1st support hits today at 19.615 and below there at 19.305.
COMEX PLATINUM (APR) 03/08/2023: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The market back below the 18-day moving average suggests the intermediate-term trend could be turning down. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. The near-term upside objective is at 998.72. The next area of resistance is around 961.05 and 998.72, while 1st support hits today at 908.35 and below there at 893.33.
COMEX COPPER (MAY) 03/08/2023: The major trend has turned down with the cross over back below the 60-day moving average. A bearish signal was triggered on a crossover down in the daily stochastics. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The market back below the 18-day moving average suggests the intermediate-term trend could be turning down. The outside day down is somewhat negative. The close below the 2nd swing support number puts the market on the defensive. The next downside objective is 3.87. The next area of resistance is around 4.03 and 4.13, while 1st support hits today at 3.91 and below there at 3.87.