Written Commentary
GOLD
Gold futures are higher, as inflation and labor data continued to support expectations of a series of rate cuts from the Fed this year. US consumer prices rose 0.4% in August, double July’s 0.2% gain and slightly above forecasts of 0.3%, pushing annual inflation to a seven-month high of 2.9%, in line with expectations. This follows Wednesday’s PPI inflation data that showed a 0.1% decline in final demand prices. Weekly jobless claims surged by 27,000 to 263,000, the highest level since October 2021 further adding to worries of a weak labor market after alongside payroll data revisions on Tuesday showed that the labor market added nearly a million fewer jobs than previously estimated from April 2024 to March 2025. Fed funds futures have priced in a 100% chance of a rate cut in September, and a 86% chance of an additional rate cut at the following meeting in October.
Fed policy will continue to serve as the main driver in gold prices, with the backdrop of a cooling labor market and a weaker dollar providing support for the metal. Geopolitical risks also underpinned demand for safe-haven assets, as US President Donald Trump urged the EU to impose tariffs on China and India to pressure Russia over the war in Ukraine, unrest in the Middle East escalated, and Poland said it shot down Russian drones that violated its airspace during a major attack in western Ukraine.
Gold continues to attract strong demand from central banks amid geopolitical tensions in Ukraine and the Middle East. China extended its gold-buying streak to ten consecutive months in August, and official data now shows central bank gold holdings have surpassed US Treasury holdings for the first time since 1996. Poland’s central bank is also pushing to raise gold’s share of reserves from 20% to 30%. Despite elevated bullion prices, central bank buying remains resilient, providing a solid price floor for gold, especially as a potential easing in US interest rates could offer further support.
SILVER
Silver futures are higher as firm expectations of a Federal Reserve rate cut next week supported buying. Data on Thursday showed consumer prices rising 0.4% in August, the fastest pace in seven months, while producer prices unexpectedly declined earlier in the week. Jobless claims also pointed to labor market weakness, climbing 27K to 263K, the highest since 2021. The figures come on the heels of disappointing labor market data earlier this month, prompting markets to price in multiple Fed cuts this year. Safe-haven demand was also supported by heightened geopolitical risks. Silver’s rally has been driven by expectations of Fed rate cuts, especially following weak US labor data.
On the macro-front, China’s industrial momentum remains strong, with recent data showing solar cell exports surged over 70% in the first half of the year, fueled by robust photovoltaic demand from India. This follows a record-breaking installation of more than 93 gigawatts of solar capacity in May—a 300% year-over-year increase—driven by a rush to connect panels ahead of upcoming policy changes that will tighten grid access.
On the supply side, global silver mine production has declined by 7% since 2016, contributing to an estimated shortfall of 800 million ounces between 2021 and 2025. Investor appetite remains resilient, with silver-backed exchange-traded products (ETPs) attracting net inflows of 95 million ounces in the first half of 2025. Since 2019, over 1.1 billion ounces have been withdrawn from mobile inventories.
Silver prices continue to find support from a persistent structural supply deficit and strong investor demand. Industrial usage is expanding, particularly in energy-related sectors such as solar power, electric vehicles, and electronics. Notably, solar applications accounted for 17% of total silver demand last year—triple their share from a decade ago.
BASE METALS
Copper: Copper futures are set for a weekly gain this week, buoyed by a global shortage of copper concentrate and a weaker USD. Three-month copper on the London Metal Exchange rose 0.6% to $10,112 per metric ton earlier this morning and is poised to end the week 2.1% higher. In Australia, the earliest available copper concentrate is 18 months away, which is why so many copper smelters in Japan and Indonesia have stopped and in China reduced production. Current copper futures prices may not fully reflect the market’s supply-demand imbalance.
LME copper recorded its strongest level in over five months on Thursday, boosted by a weaker dollar after jobless claims data added to expectations of an interest rate cut from the Fed next week. Support for copper has also been found from disruptions to mine production, with Freeport-McMoRan temporarily halting mining in Indonesia’s Grasberg, one of the world’s largest copper mines.
Copper output in Peru, the world’s third-largest copper producer, fell 2% year-on-year in July to 228,007 metric tons. However, output for the first seven months of the year rose 3.3% compared to the same period last year, and the government expects annual production to slightly increase to 2.8 million tons in 2025.
China’s loans data is due September 10-15. The main focus will be the total social financing numbers used by analysts as a gauge of industrial metals demand, expected to have risen in August from July. Despite weak factory activity indicated by the NBS PMI, demand signals in China remain strong, especially with the Yangshan copper premium hitting a three-month high earlier in the week Historically, premiums exceeding $80 per ton have signaled acute supply-demand imbalances in China’s copper market.
Zinc: Zinc is up nearly 0.5% as zinc stocks in LME registered warehouses, which at 50,625 tons have dropped around 75% since the middle of April. Cancelled warrants or zinc earmarked for delivery continue higher, with another 15,200 tons are due to leave the LME system. Worries about the availability of zinc on the LME market have created a premium, or backwardation, with the cash contract over the three-month forward, currently trading around $18 a ton.
Aluminum: Aluminum rose 1.85% in official activity to $2,673.50 a ton.
Tin: Tin gained 0.27% to $34,698.
Lead: Lead recovered yesterday’s losses, up 0.48% to $1,996.50
Nickel: Nickel was little changed, up 0.03% at $15,150.
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