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DAILY METALS COMMENTARY Wednesday March 31, 2021

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DAILY METALS COMMENTARY Wednesday March 31, 2021 DAILY METALS COMMENTARY Wednesday March 31, 2021 PRECIOUS METALS COMMENTARY 3/31/2021 Solid support levels found Infrastructure Plan could provide lows OVERNIGHT CHANGES THROUGH 6:06 AM (CT): GOLD +1.60, SILVER +0.00, PLATINUM +2.32 OUTSIDE MARKET DEVELOPMENTS: Global equity markets overnight were mixed with Asian stocks mostly lower, Russian, Australian and Spanish markets higher, and US equities under very minimal pressure. Economic news of importance overnight included softer than expected Japanese industrial production for February, much better-than-expected Australian building permits for February and most importantly a stronger than expected Chinese nonmanufacturing PMI and stronger than expected Chinese manufacturing PMI. Other reports of importance included a decline of 8000 unemployed in Germany for the month of February, a stronger than expected UK GDP reading and a steady EU consumer price index reading for March. The North American session will start out with a weekly private survey of mortgage applications followed by the March ADP employment survey which is expected to have a sizable uptick from February's 117,000 reading. The February Canadian industrial product price index is forecast to have a sizable uptick from January's 4.0% year-over-year rate. February pending home sales are expected to have a minimal downtick from January's -2.8% reading. The March Chicago PMI is forecast to have a modest uptick from February's 59.5 reading. Atlanta Fed President Bostic will speak during morning US trading hours. Earnings announcements will include Walgreens Boots Alliance and Acuity Brands before the Wall Street opening while Micron Technology report after the close. GOLD / SILVER The bull camp in gold and silver are lucky after a strong upside breakout an upside extension in the dollar index failed and the Index fell sharply back overnight. Overall, the markets should be cheered by Chinese PMI readings overnight as that tamps down the fear that the Chinese post pandemic recovery was stalling. With Chinese nonmanufacturing PMI in March jumping significantly and registering the biggest reading since the reopening last March the prospect of improved Chinese physical demand is on the horizon again. In our opinion, any improvement in physical demand in China or India will not be known until well after the fact, as key World Gold Council statistics are released on delayed quarterly basis. Unfortunately for the bull camp the charts remain extremely weak and a series of lows around $1673.30 offer thin support in Gold against a further slide down to $1647.60 which would close a gap left in April 2020. Another negative that continues to press gold down is another pattern of outflows from Gold ETFs, with gold holdings yesterday dropping for a 7th straight session. On the other hand, silver ETF holdings posted a small gain leaving net purchases at 37.1 million ounces. Unfortunately, for the bull camps in gold and silver the outflows from ETF's continue and the headlines on the outflows continues. In other words, sentiment toward gold and silver as an investment remains very negative and it could take a major leap into global risk-on recovery dialogue to alter the downward track in precious metals prices. From a longer-term perspective, the potential for another massive spending bill including infrastructure spending and likely a barrel full of pork, could be the catalyst that renews "reflation" which in turn could set the stage for inflation later-on if the US infection rate forges a downside breakout below 39,000. While the inclusion of taxes within the massive infrastructure spending program (reported to be $2 trillion) US debt is clearly set to expand rapidly. In the near term, both gold and silver might have reached very solid fundamental value, but we see the markets remaining vulnerable with gold likely failing at the previously mentioned consolidation low support point of $1673.30, with May silver posting a critical and unreliable support point at $23.88. PLATINUM The PGM markets got a bullish shot in the arm from overnight news that The South African Public investment Corporation investing $7.4 billion in platinum group metals investments with the fund indicating the rally will sustain longer than expected and will likely see more dynamic supply and demand changes ahead. It should also be noted that platinum ETFs yesterday saw an inflow of 6317 ounces, bringing the year-to-date net gain up to 2.1%. Furthermore, palladium ETFs saw an inflow of 2755 ounces and with those holdings 1.6% higher on the year. With Chinese PMI data released overnight showing the strongest readings in one year, the prospect of increased PGM consumption from auto catalyst production should be improved and in turn platinum should find the developing consolidation support level at $1,150 as a credible low zone. In palladium, traders are watching the Palladium premium over platinum as the spread between the two markets is likely prompting a-number-of smaller manufacturing entities to substitute and that could encourage more platinum usage ahead. Unfortunately for the bull camp rotation of input materials is likely to take place in areas other than auto manufacturing and therefore platinum bulls might have to be content in the market being dragged higher by palladium. Support for June palladium comes in at $2,592.50 and $2,567.50. Key support for July platinum is obviously the $1150 level with a failure of that level we project a slide down to $1139.90. In the near term, we caution against selling palladium and platinum at current levels, as the objective on those trades might be limited and those trades could also present significant risk. TODAY'S MARKET IDEAS: As indicated already, the metals complex is bifurcated with the PGM markets in favor at the same time gold and silver are out of favor. However, gold has reached what could be solid support with silver less predictable and likely to waffled with wild swings around the $24.00 level. In our opinion, the gold and silver markets are now cheap and should respect support but at present the markets lack a definitively bullish fundamental theme to spark sustain gains. NEW RECOMMENDATIONS: None. PREVIOUS RECOMMENDATIONS: None. COPPER COMMENTARY 3/31/2021 The technical picture points down but Infrastructure might support GENERAL: Technical traders are pointing to the first monthly decline in 12 months in copper as a sign of a developing downtrend in prices. If it were not for the stronger than expected Chinese PMI data released earlier this morning the copper market might have sustained its 4-day downside breakout and in turn taken out extremely critical support at $3.9420. However, the market was presented with news that J.P. Morgan Chase had reduced their position in Chinese copper by a modest amount and that could embolden the bear. On the other hand, the looming presence of what is expected to be a record massive US infrastructure spending bill should foster improved US copper demand expectations and that combined with the very positive Chinese PMI news overnight should increase the risk to shorts in copper. It should be noted that China's copper scrap imports during January and February were 60% larger than last year, which underscores improving demand, but also results in lower demand for refined copper imports. In addition to the continued strength of the Dollar, copper continues to be pressured by consistent inflows to LME copper stocks which has pushed global copper exchange stocks (LME plus Shanghai plus Comex) above 400,000 tonnes, and that indirectly reflects lukewarm global demand in the last two months. However, we would caution sellers, as the details of the Biden Administration infrastructure plans are expected to come out during today's session, and US demand expectations will likely improve substantially. MARKET IDEAS: With NBS Chinese March PMI readings showing stronger than expected results overnight, that should increase fundamental support for Copper. However, a critical technical support level sits just below at $3.9420. On the other hand, Copper prices are over 45.00 cents higher for the first quarter and it is possible with month ending today could see a large wave of profit-taking buying. NEW RECOMMENDATIONS: None. PREVIOUS RECOMMENDATIONS: None. 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 (JUN) 03/31/2021: Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The market's short-term trend is negative as the close remains below the 9-day moving average. The defensive setup, with the close under the 2nd swing support, could cause some early weakness. The next downside objective is now at 1653.5. The market is approaching oversold levels on an RSI reading under 30. The next area of resistance is around 1701.5 and 1726.4, while 1st support hits today at 1665.1 and below there at 1653.5. COMEX SILVER (MAY) 03/31/2021: Momentum studies are declining, but have fallen to oversold levels. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market is in a bearish position with the close below the 2nd swing support number. The next downside target is now at 23.270. Some caution in pressing the downside is warranted with the RSI under 30.
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