Written Commentary
PRECIOUS METALS
Gold: December gold contracts sold off following September’s inflation data, which showed that core price pressures grew quicker than expected at 0.3% m/m and 2.6% y/y. Headline inflation increased 0.6% on the month, matching expectations, while the annual rate accelerated to 3.7% from 3.4%. The report strengthens the case for continued policy restraint, even if it does not by itself settle the October rate decision. The policy question is therefore whether September’s core strength persists and whether higher borrowing costs are already providing sufficient restraint. Waller has argued that stronger growth and AI investment help explain elevated yields, with higher long-term rates doing some of the Fed’s work. Today’s Beige Book, Thursday’s PPI and retail sales, and subsequent Fed remarks will help establish whether policymakers regard the inflation surprise as grounds to accelerate tightening or as a reason to retain a firm bias while gathering more evidence. The Fed outlook remains as a broad headwind for gold. 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 3.75% to $57.28.
BASE METALS
Copper: Copper prices found support from mine supply concerns; LME copper rose 0.4% to $14,630 before September’s inflation data, while US prices fell 0.33% to $6.70. Chile’s Centinela copper mine and two striking unions continued negotiations on Tuesday amid a week-long workers strike that is affecting operations. Meanwhile, Chilean state miner Codelco has partially suspended operations at its El Teniente mine after a fatal landslide over the weekend. There is also a risk of a strike at BHP’s Escondida copper mine, which is the largest in the world, however, Reuters reported that the supervisor’s union and company representatives have reached a preliminary agreement.
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 near 230,000 tons. The premium of the cash LME copper contract over the three-month forward settled at $99 a ton on Tuesday, which was nearly half Monday’s $181.50.
Zinc: Zinc gained 0.4% to $3,747.
Aluminum: Aluminum shed 0.9% to $3,013.
Tin: Tin fell 1.7% to $50,900.
Lead: Lead added 0.1% to $1,904.
Nickel: Nickel nudged up 0.5% to $15,670.
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