Written Commentary
PRECIOUS METALS
Gold: December gold contracts were little changed overnight, but a weaker dollar favors buying conditions. The market is focused on the potential rate path for the Fed after this week’s inflation data. Money markets currently price a 15% chance of a rate hike in October and remain fully priced for a move higher in December. Fed Chair Warsh voiced optimism about US economic strength but offered nothing new on policy in comments overnight. Worries about AI companies’ heavy debt burdens have fueled demand for Treasuries this week, which has benefitted gold. Wednesday’s AI sell off may be a hint of the reaction function to a major AI-driven selloff, with the dollar falling instead of attracting safe-haven demand. A reduction in the outlook for AI investment would likely reduce bond supply and damage US growth prospects, resulting in demand for Treasuries and a lower-rate environment, all of which would be supportive to gold. Still, the broader macroeconomic outlook remains challenging for gold. Recent survey evidence has continued to support the idea that economic growth remains robust, which gives ample reason to expect yields will move modestly higher over the next couple of months following their rapid rise recently.
Silver: December contracts are up 0.81% to $57.60.
BASE METALS
Copper: Copper prices rose as a weaker dollar offered support; LME copper rose 0.9% to $14,480, while US prices rose 1.07% to $6.62. The story for copper is little changed today, following news that BHP and the supervisors’ union at the Escondida mine in Chile said they struck a deal, avoiding a strike at the world’s largest copper mine. Chilean miner Antofagasta on Thursday also reported a 7% rise in Q3 copper production and maintained its annual outlook despite the strike by workers at its Centinela mine. The real tightness in the copper market continues to stem from shipments into the US, which have drawn down global inventory.
Copper mine disruptions for 2025-26 amount to 350,000-400,000 tons per year of contained copper, which equates to only 30%-50% of published disruption allowances. Disruption allowance is the percentage of mine production that is assumed to be lost due to unplanned events in a given year. While hits to production are well below the disruption allowance, tight stocks outside of the US are likely reinforcing the feeling of supply shortages, though the main catalyst in the move higher in copper is likely to be more on the speculative side
Zinc: Zinc gained 0.9% to $3,698.
Aluminum: Aluminum rose 0.8% to $3,011.
Tin: Tin climbed 0.5% to $50,350.
Lead: Lead climbed 0.5% to $1,890.
Nickel: Nickel added 0.9% to $15,350.
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