Platinum is bucking today’s gains in the other metal markets. As we pen this spot market is in the red marginally (down $2 @$1545), though with a decent chance to make it into the black.
This divergence is likely due to the fact that Platinum has been lagging Gold and Silver and is fresh into its selloff and not as oversold as its counterparts. Platinum made a new high on Tuesday, struggled mid-week and finished Friday with a short-term technical breakdown. Lingering downside momentum could be trumping US$ weakness and the current tide amongst Platinum’s peer group.
The weekly chart shows $1500 as a key long-term pivot point, dating back to 2007. Failure to hold this level or failure to stage a bounce would imply that Platinum’s unimpeded advance since July is over.
The Commitment of Traders data shows that the speculators hold the majority of long positions. Hence, any weakness could precipitate more weakness as speculators quickly close long positions.
Copper is higher across the board (all contracts) by 1.5%. Unlike Platinum, Copper peaked two weeks ago. Its oversold condition combined with US$ weakness and some positive news out of Europe helped the metal rebound. European industrial orders in November increased more than expected while inventories, as per the London Metal Exchange, declined for the second straight day.
Near-term technicals are not very favorable for Copper. The market will have to digest a lot of supply from $3-$4/lb and commercial hedgers have moved aggressively to the bearish side in just the past few weeks. In fact, commercials are the most net short since 2005.
After such a terrific and unimpeded rise, it is difficult to see positive short-term drivers. Stronger economic data would actually have a negative impact. Weaker data would ease fears of global tightening but given the technical situation it is hard to envision a huge benefit to Copper.
US$ weakness and technical support have combined to give Gold its first gain in four sessions. Note that Friday the market formed a classic bullish candlestick with its late day recovery. Friday’s decline reversed after a test of December’s low. On the spot contract Gold looks to have support at $1095. On the two-day chart we notice a potential reverse head and shoulders formation, which targets $1110. Strong short-term resistance will come into play at $1115-$1120.
Our work leads us to conclude that in the very near term, the Gold-US$ inverse relationship has been very strong and will continue to be strong in the near term. Few pundits noticed that the relationship wasn’t strong for quite a while. At present, the US$ is battling resistance at 79.00 and below. Technically speaking there is a bit of room for the greenback to move higher and this will put pressure on Gold.
It is hard to see a catalyst for Gold in the near term as short-term developments have come to the forefront. Some central banks have started to tighten and there are fears that China could tighten. Fears of Fed tightening, to us are totally unfounded but they have to be considered Moreover, with Gold’s recent rise to a new all-time high, good news has been priced in and there is naturally an ensuing digestion period ahead.
Silver is higher this morning for much of the same reasons as to why Gold is higher. The US$ is weaker and Silver is continuing its momentum from the end of Friday’s session and particularly from today’s Asian trade. Note that $17.00 is an important support level. That combined with three straight days of heavy losses (as well as the aforementioned US$ weakness) is what is allowing the market to recover.
We do note that Silver has resumed its underperformance against Gold. This is very important to consider as it means that Silver is trading more as an industrial metal. The current fears of global tightening and the recent weakness in Copper and Platinum should confirm that Silver, in the very near term will continue to underperform Gold or at least be a distant follower on the monetary side.
As with the Gold market, the commercial hedgers remain heavily short Silver. That is an impediment for the bulls until enough weakness has wrung out the “weak hands.” Going forward, $17.00 remains a very important level on the spot contract. A strong close below could create further liquidation of speculative positions.