Written Commentary
Precious Metals
Gold: Gold futures slipped as investors locked up profits after gold hit a record high on Wednesday and as investors get ready for the Fed’s interest rate decision later today. Markets are all but certain that the Fed will cut rates, with investors honing in on comments from Powell and the Fed’s updated “dot plot” that could give signals on the scale and pace of future rate cuts.
Fed funds futures have priced in a 100% chance of a rate cut today, and a 78% chance of a rate cut in October, and nearly a 75% chance of an additional cut in December. Expectations of continued policy easing from the Fed will provide support for precious metals, while any hints at a slow pace of easing will likely act as a slight headwind. Stephen Miran was confirmed by the Senate late Monday to the Federal Reserve Board in a tight vote. This puts him in place to vote today, giving President Trump more of a print on the Fed. Markets will monitor whether Miran will vote for a 25 bp cut or favor a larger 50 bp rate cut. On the trade front, Treasury Secretary Scott Bessent, reiterated on Tuesday that he expects a finalized TikTok deal to be announced after President Trump and Xi Jinping talk on Friday.
Central bank purchasing of gold continues to provide underlying support to prices. 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 easing in US interest rates could offer further support.
Silver: Silver futures fell, pulling back from 14-year highs as a wave of profit-taking took ahold of investors. Elsewher on the monetary policy front, central banks in Canada and China are also expected to ease policy this week, while counterparts in Japan and the UK are likely to stand pat. Industrial demand from solar, electric vehicles and electronics has also kept the physical silver market tight, with supply constraints continuing to underpin prices.
Platinum: October platinum contracts fell nearly 2% to $1,375.
BASE METALS
Copper: Copper prices slipped ahead of the Fed’s meeting today, hitting a one-week low as traders trimmed positions. Benchmark three-month copper on the London Metal Exchange lost 1.6% to $9,963 a metric ton in official open-outcry trading, remaining above the 21-day moving average, which supports it at $9,910. Markets will also scrutinize the decision today on whether policymakers voted or considered voting for a bigger 50 bps cut, especially with the new addition of Stephen Miran on the Fed board. The Fed will also update its quarterly economic projections, which will be telling in whether or not members at the Fed pencil in a total of three rate cuts this year or stick with the two cuts that a majority anticipated when labor market conditions felt sturdier back in June.
China’s copper production rose 15% year on year in August, state data showed on Wednesday. China’s latest data points to weakening domestic demand. Retail sales and industrial production both missed expectations and slowed from July, while fixed asset investment growth decelerated sharply. Persistent deflationary pressures and a slight uptick in unemployment further underscore the fragile recovery.
Zinc: Zinc shed 1.3% to $2,952 after hitting a six-month high on Monday. LME registered warehouse stocks continue to fall. Zinc stocks are at 48,975 ton, down from 50,525 tons on Monday. Stocks have dropped around 75% since the middle of April. Cancelled warrants or zinc earmarked for shot up to 17,600 tons from 15,200 tons on Friday. Cash prices continue to see a premium over three-month prices, with cash prices roughly $27 higher per ton at the close on Monday, as worries about the supply of zinc linger.
Aluminum: Aluminum rose lost 1.3% to $2,683 a ton. It hit a six-month high of $2,720 on Tuesday, when the premium of the cash aluminum contract against the three-month one touched $16 a ton, the highest since March. That indicated tightness in the LME system during the current settlement week, when short position holders had to cut or roll over their contracts.
Tin: Tin slid 1.5% to $34,365.
Lead: Lead eased 0.6% to $1,998.5.
Nickel: Nickel fell 1.2% to $15,250.
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