All four metals dipped overnight as the U.S. Dollar index continues its move higher, reacting favorably to the continued U.S. rate hikes. Also supporting a stronger dollar is the news over the pond where Europe is facing issues on Brexit’s exit negotiations and concerns over Italy’s proposed budget.
The rally in the price of Palladium taking a pause as hedge funds take some profits off the table.
A very strong equity market is also putting pressure on the metals this morning. Overall, traders will be watching to see if Gold will continue its sell off and test its most recent low of $1,160 reached last month.
I doubt a test of the $1,160 level will happen, because the Gold and Silver markets at this juncture are way oversold.
According to the most recent Commitment of Traders report, the size of the net short fund position in Gold and Silver continues to grow, but not as aggressively as it has in the last month or two. This gives me the impression that the shorts are running out of confidence that these markets have any more room to the downside. This scenario can create a short-covering rally in Gold and Silver, but for the time being a very strong equity market is hindering that from happening.
Future of Platinum
Can the price of Platinum ever recover and surpass the price of Gold and Palladium once again?
There has been a complete change in attitude towards diesel engines in Europe, for the most part, we can thank Volkswagen and other manufacturers for that.
Platinum’s main use is in catalytic converters, and its use is projected to fall in the coming years as regulations change and electric cars rise in popularity. It means now that Platinum needs to find a new product to hang its hat on to get a bid back in the market.
Currently, diesel usage in Europe only accounts for about 15% of overall demand for Platinum use.
Yet, in terms of its price, rather reflecting the overabundance of supply and the anti-diesel narrative, platinum has spent the last 18 months trading between about $1,045 an ounce and just below $755.00. While other metals have had some positive volatility, the price of Platinum keeps heading lower.
Over the last six months, the interest from investors has all but dried up. Other metals still have investor interest, especially Palladium attracting large hedge funds into the fold as spot available metal seems to be in short supply.
Some dealers have been promoting Platinum products saying, it’s now an attractive investment from a pure price standpoint, and also historically, Platinum has traded at a premium to both Gold and Silver.
But I’m having difficulty buying that story. Overall, I do believe all metals will be a buy just before the midterm elections as the possibility exists of a correction in the equity markets, especially if the House or Senate has a majority shift. One can expect the President’s future agenda to run into great difficulty.
Have a wonderful Monday.
Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.