Written Commentary
PRECIOUS METALS
Gold: December gold contracts fell lower overnight to near $4,440 level as gains in oil prices and Treasury yields weighed on the metal. Iran said it would shift to a “fully offensive” military posture, while the US ruled out extending a temporary ceasefire between the two countries, keeping risk premium and inflationary worries elevated. Wednesday’s Fed minutes are likely to keep prices contained in a tight range as traders await policy clues. Traders have pushed back expectations of a September rate hike, though the recent inflation data did reveal that underlying inflationary pressures are remaining firm. As such, and given the lack of forward guidance from the Fed, a September rate hike remains firmly on the table. For many, the reports continue to make the case for the Fed to hold on rates, which will leave further upside in precious metals contingent upon whether or not upcoming data can leave that narrative intact and if oil prices can retreat.
Silver: September contracts are down 1.8% to $65.02.
BASE METALS
Copper: Copper prices on the LME eased overnight as LME inventories climbed, leaving the market to focus on weak data from China. Benchmark three-month copper on the LME was down 0.6% at $14,075, while COMEX prices fell 1% to $6.54. 17,450 tons of copper flowed into the LME system on Monday, including 2,575 tons of reverse cancellations. The deliveries back into the system are likely a result of traders looking to capitalize on the large premium of the cash contract over the three-month forward, which was last around $270, around half its $545 premium on Monday. Elsewhere, softer Chinese factory output and fixed asset investment has some near-term bullishness on copper prices, though those factors are likely only near-term hurdles. China’s factory output grew 4.5% in July from a year earlier, below expectations, while fixed-asset investment contracted 6.7% in the January-July period.
Zinc: Zinc fell 1.3% to $3,722.
Aluminum: Aluminum dipped 1.1% to $3,232.
Tin: Tin was up 0.1% to $55,850.
Lead: Lead edged up 0.1% to $1,889.
Nickel: Nickel climbed 0.5% to $16,915.
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