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Daily Metals Newsletter

2/29/2016
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52 Week
High

1263.9 on
02/11/16

52 Week
High

17.856 on
05/18/15

52 Week
High

1196.5 on
03/02/15

52 Week
Low

1046.6 on
12/03/15

52 Week
Low

13.620 on
12/14/15

52 Week
Low

811.4 on
01/21/16

20 Day MA 1201.5

20 Day MA 15.132

20 Day MA 925.0

50 Day MA 1132.8

50 Day MA 14.502

50 Day MA 888.0

100 Day
MA

100 Day
MA

100 Day
MA

1122.6

14.717

903.9

PRECIOUS METALS COMMENTARY
02/29/16
Surprise rekindling of Chinese anxiety delays corrective action
OVERNIGHT CHANGES THROUGH 6:05 AM (CT):
GOLD +10.50, SILVER +9.60, PLATINUM +8.80
Early Gold Change +$14.50 from the prior session. LME Copper Stocks 195,625 tons -1,600 tons Shanghai copper stocks -800 tons to 276,104 tons.
OUTSIDE MARKET DEVELOPMENTS: Global equities were mostly weaker with fears of fresh slowing in China and an increased fear of a BREXIT undermining sentiment. While the
losses in China were concerning they did not reach the extreme levels seen in past risk-off situations. With China announcing the prospect of massive layoffs in coal and steel sectors it
was fortunate they also moved to cut reserve rate requirements by 1/2% overnight as that cushioned the blow that might have been seen in global equity markets. Turning over to North
America, January data out of Canada presents industrial product prices and a reading on their fourth-quarter current account, which came in at a 16.21 billion deficit previously. The US
economic calendar presents February Chicago purchasing manager data that is forecast to pullback from the 55.6 reading last month. Next up is a reading on January US pending home
sales that are anticipated to show improvement from the +0.1% month over month reading in December.
GOLD / SILVER
With US equities showing two-sided action throughout Friday's trading session, it is clear that the entire safe haven event hasn't left market sentiment completely. In fact, with fresh
economic concerns flowing from China in the wake planned jobs cuts in steel and coal overnight the market has revived fears of economic turmoil inside China and that has given gold and
silver a fresh boost. However, the gold market enters the new trading week with an extending pattern of lower highs and minor pressure from a firmer Dollar. Weakness in equities and
crude oil combined with a surprise move by China to cut reserve rate requirements highlights the risk-off environment to start the trading week. Unfortunately for the bull camp open
interest fell consistently throughout the month of February in the face of gains on the charts and volume also fell which could mean the February rally in gold has not been fully attended.
Cushioning the gold market against negative technical and bearish currency influences is ongoing inflows into the world's largest gold derivative instrument (GLD). On Friday, GLD's gold
holding rose by 2.09 tonnes which leaves those holdings near the highest level in a year. With the Commitments of Traders Futures and Options report as of February 23rd for Gold
showing the Non-Commercial and Non-reportable combined traders held a net long position of 196,913 contracts, the gold market was short term overbought especially into last week's
highs. The Commitments of Traders Futures and Options report as of February 23rd for Silver showed the Non-Commercial and Non-reportable combined traders held a net long position
of 71,962 contracts. Therefore even the silver market was short-term overbought and perhaps vulnerable to developing weakness in gold and or strength in the US Dollar.
PLATINUM
Like gold and silver we think the PGM complex has managed to throw off the vulnerable status seen at the end of last week. While a slight improvement in global macroeconomic
sentiment last week should have helped to cushion platinum and palladium, the focus of the precious metals complex has shifted 180 degrees with the fresh concern toward China back in
the headlines. Fortunately platinum is catching a lift from safe haven instead of being undermined by deteriorating physical demand expectations. However, the Commitments of Traders
Futures and Options report as of February 23rd for Platinum showed the Non-Commercial and Non-reportable combined traders held a net long position of 37,284 contracts but that
reading is probably overstated given that prices into the overnight low were roughly $35 an ounce below the level where the COT report was compiled. On the other hand the
Commitments of Traders Futures and Options report as of February 23rd for Palladium showed the Non-Commercial and Non-reportable combined traders held a net long position of just
3,609 contracts and we suspect that positioning was been reduced further because the June contract to the overnight low was down $15 an ounce from the level where the COT report
was compiled. News that South African Anglo-American is planning job cuts highlights ongoing mining difficulties and that could foster ideas of tighter supplies ahead. In the end PGM
prices have decided to correlate with gold prices instead of industrial/physical fundamentals and that could make the overnight lows fairly solid.