Written Commentary
PRECIOUS METALS
Gold: December gold contracts moved higher following September’s payroll data, which fell well-below expectations at 29,000. This figure is also well below the 45,000 average monthly gain over the preceding 12 months, and BLS characterized employment as little changed across all major industries. The prior two months were revised down by a combined 60,000, with July now showing a 10,000 job loss and August reduced to a 133,000 gain. For the Fed, the report weak hiring, downward revisions, yet stable unemployment, labor utilization, and participation argue against interpreting the data as evidence of a sharp deterioration in labor demand. The report should support policy patience and a somewhat easier front-end rates bias, while the ultimate policy signal will depend on whether weak payroll growth is confirmed by further deterioration in the October employment data and by the next inflation releases. Payrolls have historically underperformed when the Labor Day holiday falls late in the month, as was the case this year. Other labor data have shown no signs of a broad increase in layoffs. Applications for unemployment benefits have been hovering at 57-year lows amid robust corporate profit growth and resilient domestic demand. The unemployment rate increased to 4.2%, labor-force participation remained edged up to 61.8%, the employment-population ratio was unchanged at 59.2%, and the average workweek stayed at 34.4 hours. Average hourly earnings rose just 0.1% in September and were up 3.0% from a year earlier, providing a more benign wage-inflation signal. For the Fed, growth indicators remain robust, favoring their hawkish stance, though it is likely that policymakers will want to see how inflation trends play out making a rate hike more favorable in December/January.
Silver: December contracts are up 0.85% to $61.72.
BASE METALS
Copper: Copper prices on the LME rose 0.5% to $14,319 as a softer dollar supported buying conditions. For copper, stronger resistance from higher oil prices is starting to be felt. Higher oil prices are once again reigniting worries over potential hits to demand, creating a cautious tone. Meanwhile, signs of industrial weakness in China and an absence of a Chinese bid due to holiday are offering resistance to the upside. Recent factory activity data from China showed a modest recovery in growth, although future conditions are likely to be scrutinized for domestic demand signals. Heavy reliance on exports for the industrial sector raises risks to the outlook for copper as geopolitical uncertainty and rising trade frictions play a more dominant role.
Meanwhile, supervisors at world’s largest mine, Chile’s Escondida, rejected offers from the company, paving the way for a potential strike. The potential strike comes amid suspended mining operations last week after a worker was killed in an accident. Meanwhile, two unions at Antofagasta’s Centinela copper mine in Chile rejected a collective contract offer on Monday, paving the way for a strike per Reuters.
Zinc: Zinc rose 0.2% to $3,732.
Aluminum: Aluminum dipped 0.1% to $3,121.
Tin: Tin was little changed at $54,350.
Lead: Lead ticked 0.3% higher to $1,863.
Nickel: Nickel shed 0.1% to $15,620.
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