Written Commentary
PRECIOUS METALS
Gold: December gold contracts are sharply lower, hitting their lowest level in over a year as AI spending worries and rising oil prices created a risk-off tone in markets. Additionally, expectations of a move upwards in policy in December are acting as a headwind. . As a whole, September’s PCE reading remains too firm to suggest that the Fed’s work is complete. December rate hike odds are priced at 73%. If growth and inflation continue to grow, while labor conditions remain steady the Fed will likely need to raise rates by 50 bps over the coming 12 months. However, if the data proves accommodative, the market could experience a curve-steepening, reflected by a drop in short-term rates. Additionally, with two members voting for a hike, it’s evident that raising rates was discussed at the meeting. However, upcoming data will ultimately be the factor that shapes the trajectory of Fed policy.
Silver: December contracts are down 4.8% to $79.895.
BASE METALS
Copper: LME copper was down 0.8% at $14,245, while US prices are down 1.17% to $6.5240. The AI selloff in the equities is pressuring copper by weighing on risk appetite. Copper is set for a monthly decline in October of about 1.3%. Still, copper is drawing support from the premium of the cash LME contract over the three-month forward. Meanwhile, the Yangshan premium remains near $205, a 13-year high. As for the inventory dynamic, US warehouses continue to rise, currently sitting around 726,000 tons. However, there are dwindling expectations that the Trump administration will put levies on the metal, which could see inventory flow out of the US and into global warehouses. That would immediately reduce tightness in the system and lead to a pullback in copper. Elsewhere, Rio Tinto restarted underground mining operations at its Oyu Tolgoi mine in Mongolia, while Chile reported a 15% drop in y/y copper output.
Zinc: Zinc gained 0.1% to $3,888.
Aluminum: Aluminum was steady at $3,078.
Tin: Tin was down 2.1% at $48,650.
Lead: Lead added 0.2% to $1,919.
Nickel: Nickel fell 0.8% to $15,420.
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