Dollar, Rates Continue to Weigh on Metals

PRECIOUS METALS

Gold: August gold fell lower overnight, as a hawkish repricing in Fed policy and a stronger dollar (DXY at a one-year high) weighed on the metal. Recent dynamics continue to show that gold is moderately correlated (negatively) with moves in the dollar; the dollar’s strength following the FOMC meeting being the main catalyst for the move lower in gold. Money markets are now favorable to a rate hike come September and are fully priced in for a hike by the following meeting in October.

Gold is looking for support at the $4,000 level following the Iran peace deal. Meanwhile, Deutsche Bank revised their base case for gold lower to $4,800, more consistent with a Fed hold. If the Fed does go through and raise rates, gold may stay consolidated closer to the $4,2000 level. Warsh’s post-FOMC statement explicitly attributed elevated inflation to “supply shocks that have driven price increases in certain sectors, including energy”. However, with Brent and WTI both continuing a decline that began when the deal was first announced, it directly undermines the primary inflation driver Warsh cited, which in turn could reduce the probability of the hikes and offer support for gold. With the inflation impulse from energy fading modestly and correlations with crude moderating, bullion’s near-term path is likely to be dictated by the trajectory of two-year real yields and the dollar, meaning a more durable recovery probably requires either softer inflation expectations and lower yields. For gold, reduced geopolitical uncertainty will direct risk-on flows away from the dollar, while lower oil prices should ease inflation fears.

Silver: July Silver is down 5% to $62.38

BASE METALS

Copper: Copper prices fell steeply, with benchmark three-month copper on the London Metal Exchange down 1.9% at $13,390; COMEX copper prices slid 2.9 % to $6.17. Like gold, a stronger dollar and hawkish-repricing in Fed policy expectations are offering near-term pressure to the metal. Metals linked to the energy transition and rising power demand are feeling the effects from investors in the equities drawing down exposure to cyclical growth stocks. Still, fundamentals for copper remain unchanged with lower LME inventory, shipments to the US, and broad-demand for AI infrastructure and energy transition expected to underpin demand.

Traders are still awaiting a sizeable reduction in energy prices, though recent moves in oil are supportive of a lower inflationary environment compared to the height of the war. Meanwhile, recent data out of China has raised some fears of weaker demand with retail sales falling 0.6% YoY, while fixed asset investment fell 4.1% YoY. Both figures came in below expectations. Among Chinese industries, investment growth slowed in the agricultures industry (5.9% vs 10.1%) and the industrial sector (0.1% vs 2.5%), while investment in the services sector fell further (-6.8% vs -4.2%). Excluding the property sector, fixed-asset investment decreased by 1.2% in the first five months of 2026, almost reversing a 1.3% increase in the January–April period.

Zinc: Zinc lost 3.1% to $3,498.

Aluminum: Aluminum was down 2.8% at $3,269. The US granted Iran a 60-day sanctions waiver, which has improved prospects of aluminum shipments through the Strait of Hormuz, easing supply worries. Rising shipments from the Middle East are expected to offer further pressure on prices, as the Middle East houses 9% of global smelting capacity. Still, damage to production facilities is likely to temper the amount of production in the coming weeks.

Tin: Tin slid 3.9% to $52,050.

Lead: Lead slid 3.9% to $52,050.

Nickel: Nickel was down 2.7% at $17,275.

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