Written Commentary
PRECIOUS METALS
Gold: December gold is higher ahead of today’s Fed decision. For gold, upside potential is in the prospect of any soft messaging, which could ease further rate hike bets. Markets are currently pricing over a 92% chance that the Fed will raise rates. August saw an ongoing improvement in inflation that might have justified leaving rates on hold perhaps if not for Chair Warsh’s hawkish remarks in Jackson Hole. The Cleveland Fed’s trimmed-mean CPI, held at 2.6% YoY in August, unchanged from July and its lowest reading since early 2021. Atlanta Fed sticky-price CPI also slowed to a 3.1% annualized pace in August from 3.5% in July, leaving the YoY rate at 2.7%. Median CPI told the same story, easing to 2.6% YoY from 2.7% in July. The one exception is the Fed’s “supercore” measure, services inflation excluding housing, which rose slightly to 3.0% YoY in August from 2.8% in July, back to the upper bound of its recent 3% range. So steady, if painfully slow, disinflation continues in the trend measures but it’s being overshadowed by a genuine energy shock, while producer prices accelerated to 5.4% YoY in August from 4.8% in July, with headline CPI holding at 3.4% YoY. That combination, improving trend inflation alongside an energy-driven headline shock, leaves a risk that today’s decision a genuine toss-up rather than a sure-hike as implied by markets.
Silver: September contracts are up 2.05% to $64.53.
BASE METALS
Copper: Copper prices on the LME rose 1.1% to $14,231 as indications of stronger demand in China supported prices ahead of the Fed’s decision. Chinese buyers are taking advantage of the recent pullback in copper prices, which has helped lift import premiums resulting in the Yangshan copper premium rising 7% to $118 per ton, its highest level in almost four years. Copper is down roughly 4% since hitting a record high of $14,875 last week, while 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 was up 0.3% at $3,835.
Aluminum: Aluminum added 1.1% to $3,288.
Tin: Tin climbed 1.3% to $52,650.
Lead: Lead rose 0.8% to $1,888.
Nickel: Nickel gained 1.7% to $16,240.
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