Written Commentary
Precious Metals
Gold: Gold prices are higher as demand for the safe haven continues despite signs that the US government shutdown could end this week. Gold is likely finding support from bets that the release of delayed US data will boost rate cut prospects from the Fed. Markets are pricing a 68.5% chance of a 25 bps rate cut from the Fed in December, up from 63.9% earlier in the morning. Fedspeak remains mixed, creating a complicated situation for Fed Chair Powell following two rate cuts earlier this year. Fed Governor Stephen Miran on Monday suggested that a 50 bp cut might be appropriate for December, while other policymakers have said they remain worried about services inflation and that they view the current interest rate as closer to neutral.
Some weak data last week led gold markets to lean more dovish in Fed expectations. Data from Challenger, Gray, and Christmas showed companies cut more than 150,000 jobs in October, the most for the month since 2003. US consumer sentiment fell sharply in November to its second-lowest reading on record, reflecting mounting concerns over the shutdown. However, the ISM Services PMI survey and ADP private payrolls data for October posted better-than-expected results. The PMI data also showed persistent inflationary pressures, with its prices index hitting a three-year high.
Continued central bank purchasing of gold will continue to provide underlying support to prices.
Silver: Silver futures are higher, with December contracts above the $50 level again after rising 4.5% Monday to end above $50 per ounce for the first time since mid-October.
Platinum: Platinum is little changed at $1,600.
Base Metals
Copper: Copper prices are mixed as China revealed new measures to support growth and as hopes that the US government shutdown could end soon lifted sentiment. Benchmark three-month copper on the LME rose 0.1% to $10,804 earlier in the morning, while US futures are down 0.40% to $5.08. China’s central bank said on Tuesday it would maintain “appropriately loose” monetary policy conditions. Meanwhile, Beijing unveiled new policy measures aimed at improving private capital investments in infrastructure projects. Investment in the private sector shrank 3.1% in the first nine months of this year, as trade tensions with the US and a real estate downturn weighed on business sentiment.
On the supply front, Chilean state-run miner Codelco announced that production fell more than 7% in September, while production at BHP’s Escondida mine, which is the world’s largest copper mine, rose almost 17%. At Collahuasi, another major copper mine jointly run by Glencore and Anglo American AAL, output fell 26%.
Chinese data also showed that producer price deflation in the country eased alongside a rise in consumer prices. The producer price index fell 2.1% in October from a year earlier; forecasts expected a 2.2% decline in prices. The index has remained negative since October 2022. NBS statistician Dong Lijuan said capacity management in key industries has narrowed year-on-year producer price declines. Consumer prices edged up 0.2% from a year earlier, reversing a two-month decline and beating the estimate for no change. The figures indicate the government efforts to rein in excessive competition have helped stabilize prices to a degree; however, weak consumer demand remains a worry.
Zinc: Zinc shed 1.1% to $3,046.
Aluminum: Aluminum dipped 0.2% to $2,865.
Tin: Tin rose 0.6% to $36,255.
Lead: Lead lost 0.4% to $2,051.
Nickel: Nickel fell 0.5% to $15,040.
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