Written Commentary
PRECIOUS METALS
Gold: December gold contracts edged higher around the $4,400 level and remained above its 50 day MA of $4,342 despite a stronger dollar and higher short-term yields. Gold’s resilience is likely pointing to a market that was over-positioned ahead of the Fed decision, and the three-day easing in oil prices. Gold so far has taken the Fed’s rate hike in stride, largely thanks to the drop in oil prices. However, if conflict in the Middle East were to escalate and oil prices rise once again, gold would likely feel significant downward pressure.
Warsh’s press conference lead market participants to believe the Fed is at the beginning of a new hiking cycle. There are several takeaways to support the idea of a renewed hawkish Fed following the meeting: it saw a unanimous 12-0 vote, which has been unusual as of late, the dot-plot showed that most FOMC members expect to hike at least once more this year, Warsh framed the hike as part of the bank’s discipline and mentioned removing some accommodation to markets, and lastly that Warsh repeatedly framed the economy as stronger than expected. All else equal, these are conditions that support further tightening.
Silver: September contracts are up 2.25% to $66.94.
BASE METALS
Copper: Copper prices on the LME gained 0.2% to $14,513 as buyers in China continue to underpin prices. The demand from China is not limited to just exchange purchasing, as physical buying has moved the Yangshan copper premium, a gauge of Chinese demand for copper imports, up 72% in September to $124 a ton. In part this is thanks to a tight scrap market domestically, which has the added effect of limiting smelting capacity in the country. Additionally, the Chinese yuan is sitting near 2022 highs, making the dollar-priced copper more affordable for Chinese buyers. Available copper stocks in LME warehouses are at 139,650 tons, inventories at the SHFE rose 2.4% this week to 56,073 tons following three-straight weeks of declines. COMEX stocks remained steady this week at 696,631 tons. The premium of US copper over LME prices has narrowed, discouraging physical shipments to the states. Inflows to COMEX warehouses have slowed after a Reuters report that the White House is undecided on refined copper tariffs. Per the report, officials are concerned that higher prices could raise manufacturing costs. Tightness in the LME system has eased, spreads are moving into contango, although that appears to be driven more by sentiment than any increase in available inventory as uncertainty over the US tariffs picture persists.
Zinc: Zinc rose 0.8% to $3,912. An accident at an industrial smelter owned by Kore Zinc has raised supply worries.
Aluminum: Aluminum fell 0.6% to $3,281.
Tin: Tin rose 1% to $53,695.
Lead: Lead was steady at $1,910.
Nickel: Nickel lost 0.8% to $16,160.
Interested in more futures markets? Explore our Market Dashboards here.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
