Dovish Fed Repricing Favors Gold

PRECIOUS METALS

Gold: Gold prices are higher as the dollar fell. April COMEX contracts are up 1.1% to $4,608. Also supporting bullion is a dovish repricing of Fed expectations. Odds of a hike at December’s meeting are negligible after ending Friday at an implied 50%. Regardless of the shock to energy prices, the Fed should be more likely to cut rates than to raise them given its dual mandate and the evident weakness in the labor market.

Fed Chair Powell on Monday said the central bank is inclined to hold rates steady and look past the energy shock from the war in Iran, though he cautioned that action could be necessary if the public inflation expectations rise significantly. Powell noted that energy disruptions tend to be short-lived, and monetary policy works too slowly to counteract them in real time. Powell also said that longer-run inflation expectations appear to be “well-anchored” despite the elevated oil prices.

Still, oil remains above the $100 mark, presenting real risks that higher energy prices will push inflation higher. Front end pricing remains firm, while one-year inflation swaps closed at 3.2% on Monday.

Gold is likely to continue to experience strong headwinds in the face of higher energy prices and risks that monetary policy could stay higher for longer. Like the equities, a sustained moved higher in gold will require material evidence of a de-escalation and a reopening of the Strait of Hormuz. Until then, inflation expectations will play an outsized role in the metal’s direction.

Silver: Silver futures are up 3.8% to $73.28.

BASE METALS

Copper: Copper prices edged higher, with benchmark three-month copper on the LME up 0.1% to $12,234 as a fall in the dollar and a risk-on sentiment lifted prices. Meanwhile, China’s official NBS Manufacturing PMI reading was supportive of prices. The index rose to 50.4 in March from 49.0 in February and above forecasts of 50.1. This marked the strongest reading since March last year and a rebound after two months of contraction, supported by stronger government spending early in the year and resilient exports driven by AI-related global demand.

Copper output in Chile, the world’s largest producer of the metal, fell 4.82% year-on-year in February to 378,554 metric tons, statistics agency INE said on Tuesday. Manufacturing production in the Andean nation was down 3% in the month on a yearly basis, the agency added.

Elevated inventory levels and macroeconomic concerns related to the Iran conflict continue to offer near-term headwinds to any sustained gains. LME copper warehouse stocks remain at nearly an eight-year high close to 360,000 tons, up 150% YTD.

Copper remains a market caught between structural bulls and cyclical sceptics. On one side, investors focused on grid build‑out, renewables and data‑center demand continue to view pullbacks as opportunities to maintain exposure to a constrained supply story. On the other, rising inventories, uneven Chinese property activity and slower factory growth in several major economies are encouraging macro funds to fade rallies and keep overall risk light.

Zinc: Zinc gained 0.1% to $3,185.

Aluminum: Aluminum rose 3.1% to $3,505.

Tin: Tin fell 1.7% to $45,950.

Lead: Lead held steady at $1,909.

Nickel: Nickel lost 1.1% to $17,080.

Interested in more futures markets?  Explore our Market Dashboards here.