Written Commentary
GOLD / SILVER
With divergence between gold and silver prices at the end of last week, it appears as if silver is embracing a physical commodity market focus while the gold market is garnering some flight to quality buying. In other words, gold is skirting the threat of demand destruction and instead is holding together off the prospect of safety buying. In a surprising development, the dollar fell in the face of the risk off environment at the end of last week, which explains some of the gold market’s ability to rally/diverge with the rest of the precious metal complex.
PLATINUM
We see the PGM markets as classic physical commodity markets vulnerable to deteriorating demand expectations ahead. In fact, it could take a significant rally in gold to provide support to PGM prices as the prospect of increased demand from the auto sector (off reports that the chip shortage is beginning to lessen) could be extracted in the event the flare in infections causes world governments to lockdown travel. From the initial reaction, palladium has decided to embrace the deflationary side of the current situation and therefore we see a key pivot point in December contract at $1,800. Not to be left out, the platinum market also came under definitive liquidation pressure in the wake of the South African virus news and has found a critical pivot point at $950.
COPPER
At least to start today December copper has managed to regain its 200-day moving average at $4.3175. Fortunately for the bull camp daily LME copper stocks declined by 3725 tons after a couple daily stock inflows last week. While we doubt the copper market will react as negatively as was seen in the initial Covid outbreak, seeing a mutation less vulnerable to current vaccines could evoke a selloff of significance.
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