Metals Head Lower in Wake of Fed Meeting

Precious Metals

Gold: Gold futures fell, extending losses from Wednesday as stronger USD and a subliminally hawkish cut from the Fed pressured the yellow metal. The Fed cut interest rates by 25 bps as expected and signaled that borrowing costs may continue to decline gradually through the rest of the year. However, Chair Jerome Powell struck a cautious tone on further easing, describing the move as a risk-management measure in response to a softening labor market. The Fed’s updated dot plot also shows the committee is expecting the Fed Funds rate to land at 3.6% by year end (median response value). This is one more rate cut than was projected back in June, although there was a wide dispersion of forecasts signaling that a high degree of uncertainty remains.

The SEP, alongside comments from Powell, sends mixed signals from the bank, highlighting a high degree of uncertainty about future economic conditions. The dot plot showed policymakers have little to no agreement on how the bank should react to current economic conditions, despite a consensus 11-1 vote to cut rates by 25 bps.

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 are lower, falling for a third consecutive session after the US Federal Reserve delivered a widely expected quarter-point rate cut but struck a more cautious stance on further easing than markets anticipated.

Platinum: October platinum contracts gained 1.3% to $1,395.

BASE METALS

Copper: Copper prices moved lower on Thursday following the Fed’s rate cut and comments from Powell, which sent mixed signals across markets. Benchmark three-month copper on the London Metal Exchange was down 0.3% at $9,967 a ton in official open-outcry trading, after touching a one-week low of $9,925 on Wednesday. US copper futures also fell, declining for the third straight session as a stronger supply outlook pressured the market. Top copper producer Chile expects national output to rise this year and next, aiming for a record 6 million tons by 2027.

Codelco reported a July output of 118,500 metric tons, a 6.4% year-on-year increase. BHP’s Escondida mine produced 114,800 metric tons, up 7.8%. China announced a 5% decline in copper production in early September, cutting about 500,000 tons of refined copper from the global market and partially offsetting Chile’s gains.

Zinc: Zinc shed 0.3% after hitting a six-month high on Monday. 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.

Aluminum: Aluminum was flat at a$2,683 a ton in official prices, having touched a one-week low of $2,666.50 earlier in the session. It hit a six-month high of $2,720 on Tuesday. The premium of the cash aluminum contract to the three-month contract had narrowed to $4 a ton on Thursday, from $16 a ton on Tuesday.

Tin: Tin slid 1.9%.

Lead: Lead gained 0.2% to $2,015.50.

Nickel: Nickel fell 0.8%.

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