Written Commentary
PRECIOUS METALS
Gold: December gold are modestly higher, rising around 0.22% overnight to $4,200 as the dollar fell sharply and as treasury yields moved lower, though the front end of the curve was little changed. Mainly, the market is awaiting tomorrow’s CPI and Thursday’s PPI and retail sales, which will shape near-term direction of yields and the dollar, consequently shaping the environment for gold. Oil prices are offering some support today, though the bid on gold is modest, reinforcing that the market is largely on the sidelines ahead of tomorrow’s data. Inflation and growth data will remain central to the near-term policy outlook. Markets assign an 81% probability to unchanged Fed policy this month. Softer recent inflation and employment data have reduced expectations of an immediate follow-up to September’s hike, even as energy prices leave the subsequent policy path uncertain. Wednesday’s September CPI report is therefore pivotal.
The Fed outlook remains as a broad headwind for gold. Cleveland Fed President Hammack said the bank needs to move to a more restrictive rate environment to control inflation. Meanwhile, September’s meeting minutes showed policymakers discussed how much further to tighten. Most expected another hike by year-end, although they differed over whether it was needed under their baseline outlook or primarily as insurance against upside inflation risks. Recent survey evidence has continued to support the idea that economic growth remains robust, which gives ample reason to expect yields will move modestly higher over the next couple of months following their rapid rise recently. These dynamics are likely to contribute to a challenging environment for gold over the coming months.
Silver: December contracts are down 0.50% to $60.21.
BASE METALS
Copper: Copper prices held steady overnight as mine supply concerns continued to offer support to prices. LME copper was little changed at $14,624, while US prices were little changed at $6.75. Chilean miner Codelco announced a partial suspension at their El Teniente mine after a landslide killed two workers on Sunday; workers at Antofagasta’s Centinela copper mine continued to strike as unions were set to resume talks on Tuesday. Copper mine disruptions for 2025-26 amount to 350,000-400,000 tons per year of contained copper, which equates to only 30%-50% of published disruption allowances. Disruption allowance is the percentage of mine production that is assumed to be lost due to unplanned events in a given year. While hits to production are well below the disruption allowance, tight stocks outside of the US are likely reinforcing the feeling of supply shortages, though the main catalyst in the move higher in copper is likely to be more on the speculative side. LME copper stocks are sitting at 232,275 tons. The premium of the cash LME copper contract over the three-month forward is at $99 a ton, which has nearly halved from $181.50 on Monday.
Zinc: Zinc slipped 0.1% to $3,755.
Aluminum: Aluminum fell 0.5% to $3,036.
Tin: Tin eased 0.5% to $52,950.
Lead: Lead rose 0.6% to $1,895.
Nickel: Nickel edged down 0.1% to $15,600.
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