Written Commentary
BASE METALS
Copper: LME copper was little changed at $14,327, while US prices rose 0.28% to $6.5255. Teck Resources’ Highland Valley copper mine is experiencing a workers strike, though the market has reflected little impact. In China, the Yangshan copper premium rose to $178 a ton, its highest level since 2014 after data showed SHFE copper stocks dropped 25% to 54,356 tons, contrasting with LME inventories, which rose 20% over last week to 273,750 tons. Data-center investment, the energy transition, mine-supply challenges, and US stockpiling ahead of potential tariffs continue to underpin prices despite uncertainty about whether US levies will actually be imposed. However, the potential tariffs present a key risk to prices if Democrats win big in midterm elections. Prices could fall steeply as a result of the Trump administration reconsidering tariffs in the event of a strong Democratic victory. On the other hand, prices could rise further if the administration announces tariffs. However, the reluctance from the administration to impose tariffs reflects the US’s inability to produce copper and existing concerns over cost-of-living pressures at home. Meanwhile, big-tech earnings this week could impact sentiment for copper if demand prospects wane, and results suggest a potential slowdown in the AI infrastructure buildout. However, positive results will add to risk sentiment and continue to support copper demand prospects.
Zinc: Zinc was up 1.4% at $3,795. Zinc prices rose to a two-week high as inventories fell and as data from the International Lead and Zinc Study Group showed that the market experienced a 3,900 tons deficit in August. The cash LME zinc contract is trading at a $81 premium over the three-month forward, suggesting tightness in the market. SHFE stocks fell 5% last week.
Aluminum: Aluminum dipped 0.6% to $3,025.
Tin: Tin gained 0.6% to $50,085.
Lead: Lead added 0.7% to $1,920.
Nickel: Nickel fell 0.9% to $15,710.
PRECIOUS METALS
Gold: December gold contracts are little changed following Friday’s selloff. The $4,000 level is being taken as a strong support/buying level. Lower oil prices are offering some support to gold, however, this week’s Fed decision is likely limiting gains as markets anticipate further tightening over the coming months. There have been several officials who have suggested that their preferred path in policy would be patience at the October meeting, so a consensus 12-0 to hold should not be taken as a reluctance to hike again in the coming meetings. Later in the week, GDP and PCE data will also test market expectations for monetary policy; forecasts expect third-quarter GDP growth of approximately 3.2% and headline PCE inflation to rise to 3.6% y/y from 3.4%.
Silver: December contracts are down 0.65% to $53.585.
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