Written Commentary
PRECIOUS METALS
Gold: December gold contracts moved lower overnight as dollar strength and hawkish Fed prospects dampened the outlook for the metal. Recent trading patterns suggest that gold has established a $4,300-$4,400 range, with Fed commentary and dollar strength playing an outsized role in determining price direction. Gold’s future upside is likely to remain under pressure as long as a hawkish Fed is priced in and as dollar strength remains. Meanwhile, PMI data indicated strong economic activity, which has reinforced expectations of another rate hike. Traders have increased bets of an October rate hike to 65% from 50% on Wednesday morning. The dollar is at its strongest level in two months, while, weekly jobless claims fell to a near 60-year low, further highlighting labor market resilience and the case for tighter monetary policy. Elsewhere, oil prices continued to rise as US-Iran talks have revealed little to no progress.
Silver: December contracts are down 1.84% to $63.20.
BASE METALS
Copper: Copper prices on the LME dipped 0.2% to $14,639 as a stronger dollar weighed on prices while Chinese demand eased ahead of a holiday weekend. The premium of the LME cash contract over the three-month forward widened to $107, the highest since early September, and a rebound from $0 a week ago, signaling tightness for nearby supply. Mining operations at BHP’s Escondida mine in Chile, the world’s largest copper mine, were suspended on Wednesday after a worker was killed in an accident. Also adding to the supply worries is a Reuters report that that unions representing workers at Antofagasta Minerals’ Centinela copper mine in Chile called on workers to hold a strike vote, adding to concerns amid ongoing contract negotiations with workers at Escondida.
COMEX inventories have once again began to record daily inflows as the premium on US copper over LME prices moved higher. COMEX warehouses now hold roughly 70% of all copper held in exchange warehouses, which has underpinned tightness in markets outside the US.
Zinc: Zinc rose 0.3% in official activity to $3,914.
Aluminum: Aluminum dipped 0.1% to $3,252.
Tin: Tin rose 0.5% to $54,150.
Lead: Lead added 0.2% to $1,924.
Nickel: Nickel slipped 0.1%, to $16,460.
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