Written Commentary
PRECIOUS METALS
Gold: December gold contracts were lower in a tight range ahead of today’s Fed decision. With the Fed expected to remain on hold, focus at the meeting will center around the vote composition and Warsh’s characterization of the US economy. Any votes to hike at the immediate meeting will reinforce expectations of a December hike and that the Fed is poised to remain on a tighter monetary policy path. Warsh has recently described the economy as strong and financial conditions as accommodative, so any change to his interpretation will likely move markets. If Warsh downgrades any growth comments, or states that policy seems somewhat restrictive, expectations of future tightening will likely be pulled back. On the other hand, if he affirms his assessment that US growth remains strong and financial conditions as loose, tightening expectations could firm. Big tech earnings are also in play for gold direction today. Strong results could further dampen gold’s appeal, potentially reversing the recent trend of investors piling into duration amid volatility and growth concerns around AI. Those concerns had seen Treasuries find solid support and has seen long-end yields drop as traders looked for safe haven plays. An unwinding of these concerns will lift long-end yields and further cement expectations of stronger monetary policy and more persistent inflationary pressures, negative for gold.
Silver: December contracts are down 0.92% to $54.040.
BASE METALS
Copper: LME copper was little changed at $14,479, while US prices were little changed at $6.6525. Focus today will center around the Fed’s decision and big tech earnings. Recently, copper has found some near-term support from a stabilization in AI stocks and stronger demand signals from China. Anthropic’s IPO filing has helped revive enthusiasm for the AI trade ahead of big tech earnings, but attention now centers around funding costs and investment returns. The Yangshan copper premium hit a 13-year high of $188 on Tuesday, as limited availability and strong demand have created tight conditions for copper in China. The scrap market in China is under modest duress, with smelters out of production, leading more demand for refined products. Tightness in the Chinese market should translate across the globe, even as the LME saw an uptick in inventories recently. SHFE copper stocks dropped 25% to 54,356 tons, contrasting with LME inventories, which rose 20% over last week to 273,750 tons.
Zinc: Zinc gained 0.7% to $3,868. The International Lead and Zinc Study Group showed that the market experienced a 3,900 tons deficit in August. The cash LME zinc contract is trading at a $81 premium over the three-month forward, suggesting tightness in the market. SHFE stocks fell 5% last week.
Aluminum: Aluminum fell 0.1% to $3,083.
Tin: Tin shed 0.3% to $51,300.
Lead: Lead lost 0.5% to $1,924.
Nickel: Nickel gained 0.7% to $15,730.
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