The bias remains up more global inflation readings overnight
GOLD/ SILVER
Witha series of hot inflation readings overnight from the UK and the Euro zone, thestrengthening dollar has not prevented gold and silver from tracking higher inthe early action. However, along with rising inflation signals are concerns ofinterest rate increases, with the Bank of England and Bank of Canada possiblycloser to hiking rates than many other central banks. Going forward, themarkets could be buffeted by the president's decision on the next FederalReserve chairman, as the balance between obtaining full employment andcontrolling inflation could be different among different leaders. Recentstatements by Federal Reserve members have varied, with James Bullard pushingfor the Fed to become more hawkish and Mary C. Daly stating it is still too earlyto act. Another potentially supportive development came from the US TreasurySecretary, who warned that December 15 would be a default deadline for the US.While the December gold contract did forge a fresh new high for the moveyesterday, the market failed and put in a modest reversal. The dollar appearsto be in a moonshot, and that is discouraging bulls in both gold and silver.Some traders suggested that a significant jump in US economic activity fromreports yesterday prompted the reversal, but we suspect comments from Bullardregarding the need to orchestrate a hawkish policy tack was the real culpritbehind the setback. October US export prices jumping a record 18%year-over-year is another inflationary concern for the Fed, and therefore Fedcommentary is likely to remain bearish directly ahead. Volatility in gold andsilver looks to expand as the threats of inflation from regularly scheduledreports and anecdotal evidence from the press will likely lift pricesaggressively, while hawkish dialogue from central bankers will prompt hardbreaks without notice. From a technical perspective, open interest in goldleveled out on Monday and remains very high, which suggests the gold marketburned significant fuel on the early November rally and may now be vulnerableto a significant dip.
PGM
Thepalladium market was the stalwart performer in the precious metals complex onMonday. However, with the recent record spec and fund net short, we suspect aportion of the move yesterday was stop loss buying. Nonetheless, near termupside targeting is seen a fraction above $2,200, and key support comes in atthe Monday low at $2,082.50. While the platinum market did not forge impressivegains like palladium to start the trading week, the charts remain bullish with higherlows and mostly higher highs. While we have nothing to base our speculation on,it is possible that some inflation money is beginning to view the PGM marketsas undervalued and potentially capable of offering greater returns than gold inthe event inflation becomes widely entrenched. Critical support in Januaryplatinum is seen at $1,062.70 with resistance pegged at $1,100.40.
MARKETIDEAS: We detect a measure of vulnerability in gold and silver, ashawkish Fed dialogue is increasing, and the US dollar is exploding on theupside. The inflation story lives on with a flurry of extremely hot reportsfrom the UK and Euro zone overnight, but without surging crude oil prices, goldmight lack a catalyst for a pulse higher. After climbing above a 6-month-olddowntrend channel resistance line last week, the December gold contract hasseemingly lost upside momentum and has rejected the $1,875 level on the chartsin the process. That long-term downtrend channel resistance line has becomesupport, with a pivot point at $1,855.35 today. We do not detect wholesaleliquidation coming, but with open interest climbing 110,000 contracts since thebeginning of the month, we would not rule out compacted stop loss selling orcompacted stop loss buying on a breakout of the $1,877-$1,848 range.
COPPER
Bias down, Chinesenews negative, exchange stocks up. Like gold, copper forged areversal yesterday that shifts the charts from bullish to bearish. The marketis probably put off balance by a rare and significant jump in daily LME copperwarehouse stocks, which were up 5,525 tonnes this morning. However, this wasonly the third daily inflow out of the last 43 sessions. Warehouse stocks haddropped to the lowest level since March 12 and were closing in on a key lowlevel from December 2005. Overnight, China indicated their refined copperoutput declined by 0.3% on a year-over-year basis in October, and that combinedwith port congestion that is slowing imports of copper material adds to theinitial bearish track this morning. While the markets did not expectsignificant takeaways from the conference call between Presidents Biden and Xi,the trade appears to be disappointed in the lack of any substance from thediscussions. The bull camp should also be disappointed in the lack of buyinginterest generated by a sweep of better-than-expected US economic data onTuesday.
MARKETIDEAS: Nearterm downside targeting in December copper is the bottom of the early Novemberconsolidation, which begins at $4.2800 and extends down to $4.270.
By The Hightower Report
Contributing tokitco.com
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mark@hightowerreport.comwww.hightowerreport.com