Written Commentary
Precious Metals
Gold: Gold hit a record high Tuesday, buoyed by expectations of interest rate cuts from the Fed, which in turn have led the dollar lower, making the metal less expensive for foreign currency holders. Gold rose to an all-time high on Monday, underpinned by a softer dollar and lower Treasury yields, with the rally being driven largely by anticipation of Fed rate cuts. August retail sales rose more than anticipated, while import prices posted their largest increase in seven months, defying expectations for a slight decline. Despite the resilient data, signs of a cooling labor market have reinforced expectations that the Fed will deliver a 25 bp rate cut.
Fed funds futures have priced in a 100% chance of a rate cut in September, and a 80% chance of an additional rate cut at the following meeting in October. Markets will analyze Fed Chair Powell’s remarks for policy guidance on the direction and pace of future rate cuts. Expectations of continued policy easing from the Fed will provide support for precious metals, while any hints at a slow pace of easing will likely act as a slight headwind. Stephen Miran was confirmed by the Senate late Monday to the Federal Reserve Board in a tight vote. This puts him in place to vote at the Fed’s meeting on Wednesday, giving President Trump more of a print on the Fed. Markets will monitor whether Miran will vote for a 25 bp cut or favor a larger 50 bp rate cut. An appeals court on Monday rejected President Trump’s effort to fire Fed Governor Lisa Cook while she challenges the legality of the President’s move. On the trade front, Treasury Secretary Scott Bessent, reiterated on Tuesday that he expects a finalized TikTok deal to be announced after President Trump and Xi Jinping talk on Friday.
Central bank purchasing of gold continues to provide underlying support to prices. China extended its gold-buying streak to ten consecutive months in August, and official data now shows central bank gold holdings have surpassed US Treasury holdings for the first time since 1996. Poland’s central bank is also pushing to raise gold’s share of reserves from 20% to 30%. Despite elevated bullion prices, central bank buying remains resilient, providing a solid price floor for gold, especially as easing in US interest rates could offer further support.
Silver: Silver futures jumped roughly 1% higher ahead of the Fed’s meeting tomorrow. Central banks in Canada and China are also expected to ease policy this week, while counterparts in Japan and the UK are likely to stand pat. Industrial demand from solar, electric vehicles and electronics has also kept the physical silver market tight, with supply constraints continuing to underpin prices.
Platinum: October platinum contracts fell 0.3% to $1,413 after paring losses from early in the session on Monday.
BASE METALS
Copper: Copper prices slipped on Tuesday as a lack of interest from China prompted a wave of profit-taking following a rally that led copper to hit a 15-month high on Monday. Benchmark copper on the London Metal Exchange fell 0.4% to $10,144 a metric ton in official open-outcry trading. On Monday, it touched $10,192.50 a ton for the highest since June last year. Markets remain focused on the Fed decision Wednesday, where it is expected that the central bank will cut rates by 25 bps, which could provide support for dollar-priced metals.
China’s latest data points to weakening domestic demand. Retail sales and industrial production both missed expectations and slowed from July, while fixed asset investment growth decelerated sharply. Persistent deflationary pressures and a slight uptick in unemployment further underscore the fragile recovery.
Zinc: Zinc fell 0.1% to $2,983 after hitting a six-month high on Monday. LME registered warehouse stocks continue to fall. Zinc stocks are at 48,975 ton, down from 50,525 tons on Monday. Stocks have dropped around 75% since the middle of April. Cancelled warrants or zinc earmarked for shot up to 17,600 tons from 15,200 tons on Friday. Cash prices continue to see a premium over three-month prices, with cash prices roughly $27 higher per ton at the close on Monday, as worries about the supply of zinc linger.
Aluminum: Aluminum rose 0.6% to $ 2,717 a ton. Mercuria has indicated it plans to take almost 100,000 metric tons of aluminum from London Metal Exchange warehouses, three sources familiar with the matter told Reuters, a move that could reduce the commodity trader’s dominant position. As of September 4, LME data showed its holdings of available or on warrant aluminum amounted to more than 426,000 tons. The premium, or backwardation, for the cash aluminum contract over the three-month forward is currently around $5 a ton. The global aluminum market is roughly balanced. The consensus forecasts in the latest quarterly Reuters survey of analysts sees a small surplus of 200,000 tons this year and 281,500 tons next year.
Tin: Tin climbed 0.3% to $34,725.
Lead: Lead fell 0.1% to $2,001.
Nickel: Nickel eased 0.1% at $15,415.
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