Written Commentary
Base Metals
Copper: Copper prices on the LME rose 1.3% to $10,963 after hitting $11,025 during the session, its highest level since October 30. Meanwhile, US prices are up nearly 1.80% to over $5.09, as increased expectations of a Fed rate cut next month have lifted sentiment. Copper flows from LME-registered warehouses to the US continue to draw down stocks. LME-registered warehouses are down 42% this year. The LME cash copper contract over the three-month forward rose to $25 a ton on Monday, its highest since mid-October, but has since eased. Copper inventories at COMEX warehouses exceed 400,000 tons, or one-quarter of the US’s annual demand.
Weak fixed-asset investment data out of China earlier in November is likely to cap gains in LME copper ahead of industrial profit data on Thursday, following strong readings in August and September. Focus will also center around government efforts to reduce excess capacity. The Yangshan premium, an indicator of Chinese demand for copper imports, fell 6% on Tuesday to $32, its four-month low, which it hit a week ago.
Asia Copper Week is underway with many new developments around copper smelters. According to reports, Chilean copper miner Codelco’s record-high offers to Chinese copper buyers are leading some to declare they will opt out of next year’s term contracts. Codelco has offered Chinese buyers a $350-a-ton premium over LME prices, an increase over the $89 a ton agreed upon during last year’s negotiations. At least three of Codelco’s Chinese customers have said they are now prepared to walk away from term contracts this year and opt for spot deals instead. Elsewhere, a Reuters poll of 15 industry sources, including smelters, traders, analysts, and consultants, produced forecasts for smelters’ processing fees ranging from -$30 to $10, with results clustered around zero. Spot processing fees have stayed negative for almost one year, an unprecedented stretch, in part due to unexpected disruptions at major mines.
Zinc: Zinc added 1.2% to $3,030.
Aluminum: Aluminum rose 1.7% to $2,848.
Tin: Tin was up 0.7% at $37,800 after hitting $37,880 for its highest since April 2.
Lead: Lead gained 0.2% to $1,984.
Nickel: Nickel dipped by 0.2% to $14,850.
Precious Metals
Gold: Gold prices edged higher as markets increasingly expected a dovish outcome from the Fed in December. Several Fed officials have offered dovish remarks over the last several days, including key Powell ally NY Fed President John Williams. Williams said on Friday that interest rates could fall without putting the Fed’s inflation goal at risk while helping guard against a slide in the job market. Additionally, reports have been circulating that Kevin Hassett, director of the NEC for the White House, is the White House’s favorite choice for the Fed Chair position. Treasury Secretary Scott Bessent said on Tuesday there was a very good chance President Trump would announce a new chairman before Christmas. Traders on prediction markets are pricing a 54% chance that Hassett will be named as Powell’s replacement. Markets are pricing over an 85% chance of a 25 bp cut in December.
Data out of the US today led to some selling in gold with the release of weekly initial jobless claims figures, which saw gold fall from session highs. Initial claims came in just below forecasts at 216,000 claims. Meanwhile, durable goods orders in September rose 0.5% on the month, in line with forecasts. Yesterday’s data was more favorable to prices, with the Consumer Confidence Index sharply falling in November and September’s retail sales figures giving a relatively benign reading.
San Francisco Fed President Daly said she supports lowering interest rates at the bank’s meeting next month. Daly sees a deterioration in the job market as being harder to control and contain than an increase in inflation, which has proven to be a lower risk than previously expected. Meanwhile, Fed Governor Waller reiterated his calls for a December rate cut.
On the geopolitical front, the US and Ukraine have signaled positive developments regarding a plan to end the war with Russia after agreeing to modify an earlier proposal that was widely seen as too favorable to Moscow. The long-term outlook for gold will remain supported by continued central bank purchasing.
Silver: Silver futures are up over 1.6% to $51.82.
Platinum: Platinum is up around 0.80% to $1,579.
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