Written Commentary
BASE METALS
Copper: Copper prices on the LME rose 1.2% to $14,408 as buyers disregarded the Fed’s rate hike thanks to renewed demand in China. Physical purchasing in China is helping consolidate the move for copper, as the Yangshan copper premium, a gauge of Chinese demand for copper imports, rose to its highest level in nearly four years at $118 a ton on Wednesday. Physical markets also reflect strong demand, with spot prices hitting their highest premium against SHFE contracts in nearly three years. Stocks in Chinese warehouses are also at their lowest levels since January 2024, at 54,780 tons. The premium of COMEX copper against LME prices has fallen sharply. Inflows to COMEX warehouses have slowed after a Reuters report that the White House is undecided on refined copper tariffs. Per the report, officials are concerned that higher prices could raise manufacturing costs. Tightness in the LME system has eased, spreads are moving into contango, although that appears to be driven more by sentiment than any increase in available inventory as uncertainty over the US tariffs picture persists.
Zinc: Zinc climbed 1.2% to $3,860. An accident at an industrial smelter owned by Kore Zinc has raised supply worries.
Aluminum: Aluminum rose 0.5% to $3,284.
Tin: Tin advanced 1.2% to $53,080.
Lead: Lead gained 0.9% to $1,902.
Nickel: Nickel added 1.1% to $16,340.
PRECIOUS METALS
Gold: December gold contracts moved higher into the $4,400 level and above its 50 day MA of $4,338 despite a stronger dollar and higher short-term yields. Gold’s resilience is likely pointing to a market that was over-positioned ahead of the Fed decision, leading traders to reconcile in the aftermath. The Fed’s dot plot showed 16 of the 18 officials who submitted rate projections are expecting at least one increase this year; two favored holding rates at the new level. The larger surprise was the persistence of the projected tightening path. In June, officials had penciled in one 2026 hike followed by a quarter-point cut in 2027. The September median now implies another hike this year and no reduction in 2027, before rates begin declining in 2028. Warsh’s press conference lead market participants to believe the Fed is at the beginning of a new hiking cycle. There are several takeaways to support the idea of a renewed hawkish Fed following the meeting: it saw a unanimous 12-0 vote, which has been unusual as of late, the dot-plot showed that most FOMC members expect to hike at least once more this year, Warsh framed the hike as part of the bank’s discipline and mentioned removing some accommodation to markets, and lastly that Warsh repeatedly framed the economy as stronger than expected. All else equal, these are conditions that support further tightening.
Silver: September contracts are up 1.80% to $66.02.
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