Written Commentary
PRECIOUS METALS
Gold: December gold contracts fell sharply overnight as the dollar strengthened and as yields rose amid a rise in oil prices. President Trump rejected Iran’s peace proposal. The move in oil underscores an already-sensitive point in the rates cycle, with markets assigning a 66% probability of an October hike, and are fully priced in for a second rate hike by January. The repricing reflects both strong US activity and a more persistent energy-driven inflation concern. This week’s August PCE inflation report, September nonfarm payrolls, ISM manufacturing PMI, and several Fed speakers will play a large role in validating or rejecting market expectations of an October hike. Gold’s future upside is likely to remain under pressure as long as a hawkish Fed is priced in and as dollar strength remains.
Silver: December contracts are down 4.89% to $61.62.
BASE METALS
Copper: Copper prices on the LME fell 1.8% at $14,364 as weak data out of China, rising oil prices, and a stronger dollar hurt buying conditions and dampened demand prospects following last week’s rally. Industrial profit growth in China slowed in August despite strength in technology manufacturing. Weak domestic demand outweighed strength in the domestic AI boom in China, firms were unable to maintain pricing power due to weak domestic demand, which lead to excess capacity in multiple sectors. This dynamic leaves Chinese firms more reliant on foreign demand, risking reliance on exports, making it susceptible to further demand risks. Household income and consumption data will play a greater role in indicating potential industrial growth and demand for copper in the Chinese markets. Still, markets will look ahead to PMI data later this week out of China.
The premium of the LME cash contract over the three-month forward remains near early September highs as tightness in warehouses outside the US has supported supply worries. Meanwhile, mining operations at BHP’s Escondida mine in Chile, the world’s largest copper mine, were suspended last week after a worker was killed in an accident. Also adding to the supply worries is a Reuters report that that unions representing workers at Antofagasta Minerals’ Centinela copper mine in Chile called on workers to hold a strike vote, adding to concerns amid ongoing contract negotiations with workers at Escondida.
Zinc: Zinc dropped 1.9% to $3,826.
Aluminum: Aluminum was down 1.3% to $3,226.
Tin: Tin retreated 1.6% to $53,450.
Lead: Lead fell 1.2% to $1,905.
Nickel: Nickel slipped 0.9% to $16,195.
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