Written Commentary
GOLD
Gold futures edged higher following PPI inflation data that showed a 0.1% decline in final demand prices, while core PPI rose 0.3% in August and 2.8% over the past year, marking the largest annual increase since March 2025. The reading led to a the dollar falling sharply after the release, but has largely recovered and it little changed on the session.
Focus now shifts to Consumer Price Index inflation data on Thursday, which could offer more clarity on the size of the Fed’s expected rate cut and expectations on the amount of easing the economy could see from the Fed this year. Fed funds futures have priced in a 100% chance of a rate cut in September, and a 79% chance of an additional rate cut at the following meeting in October. Fed policy will continue to serve as the main driver in gold prices, with the backdrop of a cooling labor market and a weaker dollar providing support for the metal. Geopolitical risks also underpinned demand for safe-haven assets, as US President Donald Trump urged the EU to impose tariffs of up to 100% on China and India to pressure Russia over the war in Ukraine, unrest in the Middle East escalated, and Poland said it shot down Russian drones that violated its airspace during a major attack in western Ukraine.
Gold continues to attract strong demand from central banks amid geopolitical tensions in Ukraine and the Middle East. China extended its gold-buying streak to ten consecutive months in August, and official data now shows central bank gold holdings have surpassed US Treasury holdings for the first time since 1996. Poland’s central bank is also pushing to raise gold’s share of reserves from 20% to 30%. Despite elevated bullion prices, central bank buying remains resilient, providing a solid price floor for gold, especially as a potential easing in US interest rates could offer further support.
SILVER
Silver futures are higher after weaker-than-expected US producer price data strengthened expectations that the Federal Reserve will resume rate cuts at its meeting next week. The figures came on the heels of disappointing labor market data earlier this month, prompting markets to price in multiple Fed cuts this year. Attention now turns to Thursday’s consumer inflation report for further policy clues. Safe-haven demand was also supported by heightened geopolitical risks. Silver’s rally has been driven by expectations of Fed rate cuts, especially following weak US labor data.
On the macro-front, China’s industrial momentum remains strong, with recent data showing solar cell exports surged over 70% in the first half of the year, fueled by robust photovoltaic demand from India. This follows a record-breaking installation of more than 93 gigawatts of solar capacity in May—a 300% year-over-year increase—driven by a rush to connect panels ahead of upcoming policy changes that will tighten grid access.
On the supply side, global silver mine production has declined by 7% since 2016, contributing to an estimated shortfall of 800 million ounces between 2021 and 2025. Investor appetite remains resilient, with silver-backed exchange-traded products (ETPs) attracting net inflows of 95 million ounces in the first half of 2025. Since 2019, over 1.1 billion ounces have been withdrawn from mobile inventories.
Silver prices continue to find support from a persistent structural supply deficit and strong investor demand. Industrial usage is expanding, particularly in energy-related sectors such as solar power, electric vehicles, and electronics. Notably, solar applications accounted for 17% of total silver demand last year—triple their share from a decade ago.
COPPER
Copper futures are higher, getting a boost from PPI data in the US as markets await loans data from top consumer China. China’s loans data is due September 10-15. The main focus will be the total social financing numbers used by analysts as a gauge of industrial metals demand, expected to have risen in August from July.
Yesterday, the yuan rose to a 10-month high against the USD, making dollar-priced metals more attractive for Chinese buyers. Freeport-McMoRan said it had temporarily halted mining in Indonesia’s Grasberg, one of the world’s largest copper mines, after a large flow of wet material blocked access to parts of the underground mine, restricting evacuation routes for seven workers. Bahlil Lahadalia, Indonesia’s mining minister, said on Tuesday his team would go to the area for checks and give updates once they have returned.
Chinese imports of unwrought copper fell to 425,000 tons in August from July but were higher year-over-year, while copper concentrate imports rose to a four-month high of 2.76 million tons. Despite weak factory activity indicated by the NBS PMI, demand signals remain strong, especially with the Yangshan copper premium hitting a three-month high. Beijing’s removal of subsidies for scrap copper recyclers has helped ore refiners improve margins. Looking ahead, refined copper imports are expected to stay robust in September due to favorable import conditions and subdued domestic output.
Focus is also on zinc stocks in LME registered warehouses, which at 50,825 tons have dropped nearly 75% since the middle of April. Cancelled warrants or zinc earmarked for delivery indicate another 15,375 tons are due to leave the LME system. Worries about the availability of zinc on the LME market have created a premium, or backwardation, with the cash contract over the three-month forward currently trading around $18 a ton.
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