Platinum and especially palladium traded lower in response to reduced demand from the automobile industry where production is being negatively impacted by the ongoing shortage of semiconductors. Palladium, which reached a record $3018/oz back in May, has since slumped by almost 30% to reach a 12-month low. Adding to the pressure on palladium has been the early 2021 surge which increasingly has seen automakers switch to using more platinum in gasoline-powered cars. Platinum remains in our view a potential strong recovery candidate, not only due to the mentioned switching but also its relative cheapness to gold which reached an eight-month high at 820 dollars this past week.
Industrial metals had another strong week with aluminum and nickel notching fresh multi-year highs on the outlook for tightening supply and booming demand, not least due to the clean energy transition and China’s crackdown on emissions in energy-intensive industries producing aluminum, nickel and steel. Aluminum received an additional boost due to political unrest in Guinea, a key source of supply of bauxite - a feedstock used to make alumina which is further processed into aluminum.
Dr. Copper, used in everything from wiring and electronics to electrical vehicles, and as such a good indicator of global growth and activity, remains the go-to industrial metal from investors and speculators seeking exposure to the sector. In addition, the ease of access to trading copper around the world, together with its relatively deep pool of liquidity at the three main exchanges in New York, London and Shanghai, often sees the price of copper, not only react to copper fundamentals but also to global macro-economic developments.
The helicopter perspective shows copper, one of the kings of the so-called “green” transformation, still lingering in a downtrend but which at the same time has managed to put in a double bottom around $3.95/lb. While we wait for a higher high to attract fresh momentum, the risk of a deeper correction cannot be ruled out, but in our opinion, copper remains a buy on fresh strength and any potential additional weakness.
Crude Oil has settled into a relatively tight range near the upper end of our preferred mid-60’s to mid-70’s range. A prolonged Gulf outage following Hurricane Ida has removed more than 20 million barrels from the market while refineries have struggled to reopen following power cuts and flooding. These developments were expressed in a price supportive but also very distorted weekly inventory report in which the US Energy Information Administration lowered production by 1.5 million barrels/day and refinery demand by 1.6 million barrels/day.