Written Commentary
Base Metals
Copper: Copper prices are higher as benchmark three-month copper on the LME rose past $11,000 for the first time this month, buoyed by a weaker dollar and positive sentiment after the end of the US government shutdown. However, gains were capped by weak loan data out of China. Outstanding total social financing, a measure of credit and liquidity in the economy, grew at its slowest pace in seven months in October. TSF rose 8.5% year-over-year in October, slowing from 8.7% a month prior.
New loans by Chinese banks also fell sharply from the previous month as households and businesses remained wary of taking on more debt due to economic uncertainties and trade tensions with the US. Banks made 220 billion yuan ($30.89 billion) in new loans last month, a steep fall from September’s 1.29 trillion yuan. Markets were expecting a reading of 500 billion yuan. More data out of China will come Friday, including new home prices, retail sales, and industrial output.
China’s central bank pledged to keep monetary policy “appropriately loose,” while Beijing introduced measures to boost private investment in infrastructure amid a 3.1% drop in private sector investment this year. October data showed easing producer price deflation and a slight rebound in consumer prices, signaling some stabilization from government efforts, though weak consumer demand remains a concern.
On the supply front, Chilean state-run miner Codelco announced that production fell more than 7% in September, while production at BHP’s Escondida mine, which is the world’s largest copper mine, rose almost 17%. At Collahuasi, another major copper mine jointly run by Glencore and Anglo American AAL, output fell 26%. Ongoing disruptions around the globe should help support copper prices in the near term.
Zinc: Zinc fell 0.2% to $3,068.
Aluminum: Aluminum gained 0.2% to $2,899.
Tin: Tin was up 0.4% at $37,560. Data from Indonesia’s trade ministry on Monday showed that refined tin exports to China fell by more than 50% year-over-year to 2,643 tons in October, adding to concerns over supply.
Lead: Lead dropped 0.4% to $2,086. LME data shows a large long holding of lead futures due to be settled or rolled over next week.
Nickel: Nickel was flat at $15,055.
Precious Metals
Gold: Gold prices are lower despite a weaker dollar as uncertainty subsided following the end to the government shutdown in the US, sparking demand for riskier assets. The White House on Wednesday said that it was unlikely that the October jobs and consumer price index reports will be published as a result of the shutdown. Market odds of a December rate cut have also fallen, with Fed Funds futures pricing a 53.6% chance of a rate cut in December, down from nearly 65% this time yesterday as traders trim bets. Private labor data is somewhat mixed, but recent figures from ADP suggest job cuts by US firms, signaling continued weakness in the labor market. A Reuters poll found that 80% of economists expect the Fed to cut rates by 25 bps next month.
Fedspeak remains mixed, and paired with uncertainty over December’s move from the Fed, focus will continue to stay on Fed speakers. Continued central bank purchasing of gold will continue to provide underlying support to prices.
Silver: Silver futures fell over 1% to $529.
Platinum: Platinum is 1.1% lower at $1,613.
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