Written Commentary
Precious Metals
Gold: Gold futures are higher following the release of PCE inflation data for August that came in line with expectations and sent the dollar lower. PCE inflation grew 0.3% in August and 2.7% year-over-year, while core PCE grew 0.2% in August and 2.9% on the year. A release of strong economic data out of the US on Thursday dampened expectations of interest rate cuts from the Fed. US GDP was revised higher to reflect a 3.8% growth in Q2, while durable goods orders unexpectedly rose and initial jobless claims fell to a two-month low. Fed Funds futures are pricing an 87.7% chance of a cut in October, up from 85.5% yesterday. However, futures had priced a 92% of a Fed cut in October on Tuesday, signaling that overall expectations of rate cuts have been dimmed slightly due to the hot data from Thursday. December contracts are pricing a 63.8% chance of a cut, up from 60.5% yesterday but down from 73% on Tuesday.
On the geopolitical front, NATO warned Russia on Tuesday that it would use “all necessary military and non-military tools” to defend itself, as President Trump shifted rhetoric by asserting that Ukraine could recover all territory occupied by Russia with support from the EU and NATO.
Still, persistent central bank and ETF demand continues to support gold prices, with SPDR Gold Trust holdings reaching a three-year high and China extending its buying streak to ten months. Despite elevated bullion prices and rising input costs, resilient official sector purchases, especially from China and Poland, are helping establish a price floor, with potential upside if US interest rates ease, bolstering gold’s appeal as a reserve asset and inflation hedge.
Silver: December silver contracts rose over 1.3% as a PCE inflation data led the dollar weaker and added to expectations of interest rate cuts from the Fed. Silver continues to see sustained support from strong fundamentals, with tight supply underpinning prices and a solid demand picture from solar, electric vehicle, and other tech industries. Silver is up over 55% year-to-date.
Platinum: Platinum rose higher with December contracts up 3.5%. Platinum is gaining support amid a persistent supply gap caused by weak mine output and stagnant recycling. The World Platinum Investment Council expects South Africa’s mine supply to fall 6% this year. Although recycled platinum supply is improving modestly, it remains at historically low levels. Valterra Platinum CEO Craig Miller also warned that global primary production of platinum group metals could decline 20% by decade’s end. On the demand side, industrial use has weakened amid slower automotive output and subdued industrial activity, but investment demand has surged.
Base Metals
Copper: Copper prices fell, denting this week’s rally after Freeport-McMoran Inc. declared force majeure at its Grasberg mining complex in Indonesia after a deadly landslide earlier in September forced the miner to suspend operations. Benchmark three-month copper on the London Metal Exchange lost 0.7% to $10,190. Copper is up 3.6% this month after hitting a 15-month high of $10,485 on Thursday as analysts lowered their global supply forecasts for 2025 and 2026 after the disruption at the Grasberg mine in Indonesia.
Adding pressure to copper is a declining yuan, heading for its biggest weekly drop against the dollar in two months. The weaker yuan makes dollar-priced metals more expensive for Chinese buyers ahead of the country’s national holiday, which runs from October 1-8 this year and usually slows overall activity. Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 6.6% this week while the Yangshan copper premium, which reflects demand for copper imported into China, stabilized to a one-month low of $53 a ton. The China Nonferrous Metals Industry Association said it had proposed specific measures to control copper smelter expansion as persistently low processing fees have reduced smelter profits. China’s political leaders said in early July they would tackle “disorderly price competition.”
Zinc: Zinc slipped 1% to $2,896.50 amid reports that the European Commission plans to impose steep tariffs, ranging from 25% to 50%, on Chinese steel imports and related products in the coming weeks. Any reduction in Chinese steel production resulting from these tariffs could substantially diminish zinc demand. Should China produce less steel due to limited access to the European market, its demand for zinc is likely to decrease, exerting downward pressure on its prices.
Aluminum: Aluminum eased 0.4% to $2,647.
Tin: Tin shed 0.1% to $34,400.
Lead: Lead lost 0.9% to $1,998.
Nickel: Nickel was down 0.5% at $15,200.
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