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<\/p>\nBoth gold and silver continue to make significant gains due to several underlying factors in the market (negative real interest rates, Covid-19, inflationary fears, overvalued markets, political risks, geopolitical tensions, hedging). The ratio of the 1-month Gold contract to the 1-month Silver contract (Figure 1) continued the downward trending, falling another 4% this last week as front month silver rallied 7.2% and front month gold 2.9%.\u00a0With the front month silver and gold contracts closing yesterday at $26.01 and $2001.2, respectively, the gold\/silver ratio is now 76.93, or 18.5% higher than the 15-year average.\u00a0December Gold (Figure 2) closed yesterday at $2021 and September silver (Figure 3) moved up to $26.03 from $24.3 last week.\u00a0Both gold and silver have risen 10.2% and 33%, respectively, since July 17.<\/p>\n
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From an open interest perspective, gold\u2019s open interest is down 5% from 7\/17, the beginning of the recent bull run, and down 8.3% from its recent peak on 7\/23.\u00a0\u00a0This is different than silver, where silver\u2019s open interest continues to climb, up 11% from 7\/17.\u00a0\u00a0Both gold and silver saw drops in the COT net funds positions between the 7\/21 and 7\/28 reports. \u00a0While the number of gold short positions held by the bullion banks are at historic positions, they fell 7.7% from the previous week\u2019s report.\u00a0The difference between the December and August gold contracts at $19.8\/oz, which is similar to last week.\u00a0We continue to believe that for the longer-term, fear of inflation resulting in negative real interest rates will continue to pressure gold higher.\u00a0\u00a0But does the rapid rise in gold, combined with falling total open interest falling as gold rises, possibly signal this recent rise may be partly an attempt to close shorts?<\/p>\n
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Now for Palladium.\u00a0Palladium saw a large move down this last week and even with this move down, the palladium\/silver ratio continued to fall, highlighting the significance in the silver move.\u00a0\u00a0Total open interest as well as non-commercial net-position of funds continue to increase for palladium. \u00a0Even though total open interest fell last week, it is still climbing with respect to 7\/17.\u00a0The most recent COT report shows net non-commercial positions continue to increase in palladium as well.\u00a0Continued demand for palladium as well as a continued rise in total open interest should continue to provide support for the metal.<\/p>\n
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