Metals On Notice. Manic Metals Report 06/07/2024

The ECB put the US on notice and cut rates sending metals soaring. Can the United States keep the momentum going as we await, we all important monthly jobs report.

Gold and silver continue to get boost not only from inflation but on the flip side the possibility that inflation may cool, and we will see a more commentating great scenario from the Federal Reserve.

Traders are on guard because non-interest-bearing gold usually has an inverse relationship with the path of US interest rates. Yet the recent lows in gold and silver yes that the moves and these levels may be driven by something much cheaper, more consequential than just your traditional relationship between interest rates and precious metals.

Rate cut or no rate cut the underlying fundamentals for the precious metals continues to be very solid not only because of historic inflation but the desire for many countries to diversify their central bank holdings away from the US dollar and back into other assets such as gold.

While the Biden Treasury Department tried to downplay countries reduction of dollar assets in favor of gold the reality is it’s a trend that may accelerate especially when the world starts to view the leadership of the United States be a bit lacking.

The foreign policy under President Biden has shaken and confidence in the United States and its clumsy diplomacy with our friends and adversaries have pushed our enemies closer together and our friends farther apart.

And while central banks have been buying gold like it’s going out of style individual investors are behind the curve and fail to embrace the recent precious metals rally.

Reuters reported that global physically backed gold exchange traded funds (ETFs) attracted their first flows in May after a year, powered by additions to holdings by Europe- and Asia-listed funds, the World Gold Council (WGC) said on Thursday.

Thy say that safe-haven demand driven by geopolitical and economic uncertainty, as well as persistent central bank buying contributed to a rally in gold from March to May, taking spot prices to a record $2,449.89 per ounce on May 20.

Gold ETFs, which store bullion for investors and are a major category of investment demand for the precious metal, saw the inflow of 8.2 metric tons, or $529 million, in May, the WGC, an industry body whose members are global gold miners, said in a research note. Higher gold prices and inflows drove total assets under management up 2% to $234 billion, the highest since April 2022, it added. Their collective holdings rebounded to 3,088 tons in May but were still 8.2% below the 2023 average. Gold ETFs had three consecutive years of outflows with 244.4 tons of decline in 2023 amid high global interest rates.

Copper prices are also pulling back even as Chinese data seem to suggest their export market is looking solid.

Reuters reported that China’s exports grew more quickly and for a second month in May, suggesting factory owners are managing to find buyers overseas and providing some relief to the economy as it battles to mount a durable recovery. The jury is still out, however, on whether the export sales are sustainable while a protracted property crisis has led to persistent weakness in domestic demand – a factor highlighted again in last month’s imports figures.

Coppers price correction should be nearing an end.  Today’s jobs report could be the deciding factor as to whether the copper markets bottom is in or make a new leg down.

Hedgers for copper should start laying in on any brakes at these levels that we cannot discount the possibility for more downside if the charge comes in too strong but at the same time the shortages that are looming next year could come into play there is no doubt that the copper move probably got ahead of itself but we do expect that we will see that all time high taken out even though it may take some time .

Aluminum futures seem to be in the same boat as copper. We recommend trading the September contract at the CME and we are looking for signs of a bottom.

Need to get an uncertain outlook about economic growth perhaps the play might be to be long gold and short platinum. The Moore Research Center points out that during the month of June the tendency is that if you buy August Goldman sell 2 July platinum the trend is up 13 out of the last 15 years. If’ we get a neutral jobs report today it might be time to look at that spread seriously.

Rising risk of a conflict between the United States and Russia could be another signal not to be anywhere close to the short side of Palladium.

That market is showing technical signs of bottoming, and we should be near the lower end of the trading range.

Any signs that supply of Palladium get interrupted could cause this market to surge back to the recent highs.

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