Written Commentary
Precious Metals
Gold: Gold prices are higher as comments from several Fed officials have led markets to increase bets on a December rate cut, which as also driven yields lower and softened the dollar, further supporting the yellow metal. Delayed US data was neutral to bullion prices: September’s retail sales figures showed that sales grew 0.2% on the month, while producer prices rose as expected in September, thanks to an increase in food and electricity prices. Monday’s Fedspeak was supportive of gold prices as San Francisco Fed President Daly said she supports lowering interest rates at the bank’s meeting next month. Daly sees a deterioration in the job market as being harder to control and contain than an increase in inflation, which has proven to be a lower risk than previously expected. Meanwhile Fed Governor Waller reiterated his calls for a December rate cut. NY Fed President John Williams said on Friday that interest rates could fall without putting the Fed’s inflation goal at risk, while helping guard against a slide in the job market. Markets are now pricing nearly an 81% chance of a 25 bp cut in December.
On the geopolitical front, the US and Ukraine have signaled positive developments regarding a plan to end the war with Russia after agreeing to modify an earlier proposal that was widely seen as too favorable to Moscow.
The long-term outlook for gold will remain supported by continued central bank purchasing.
Silver: Silver futures are up 0.3% to $50.15 as dovish talk from Fed officials has lifted sentiment.
Platinum: Platinum was down 0.2% to $1,550.
Base Metals
Copper: Copper prices on the LME rose 0.8% to $10,855 as outflows to the US supported prices, while US prices rose 0.75% to over $5 as increased expectations of a Fed rate cut have lifted sentiment. Copper stocks in the LME-registered warehouses are down 42% this year amid outflows to the COMEX warehouses, which keep on rising after hitting a record high in recent days. The LME cash copper contract over the three-month forward rose to $25 a ton on Monday, its highest since mid-October and has since slipped to $23. Copper inventories at COMEX warehouses exceeded 400,000 tons or one-quarter of the US’s annual demand.
Capping gains in LME copper was weak fixed-asset investment data out of China earlier in November, which pointed to broad economic softness. However, markets are awaiting industrial profit figures from China on Thursday, following strong readings in August and September. Focus will also center around government efforts to reduce excess capacity. The Yangshan premium, an indicator of Chinese demand for copper imports, fell 6% on Tuesday to $32, its four-month low, which it hit a week ago.
Asias Copper Week is underway and Chinese copper smelters are likely to face record low processing fee’s for next year. A Reuters poll of 15 industry sources including smelters, traders, analysts and consultants produced forecasts ranging from -$30 to $10, with results clustered around zero. Spot processing fees have stayed negative for almost one year, an unprecedented stretch, in part due to unexpected disruptions at major mines.
Zinc: Zinc held steady around $3,000.
Aluminum: Aluminum remained near $2,8123.
Tin: Tin added 1.1% to $37,800.
Lead: Lead was unchanged at $1,984.
Nickel: Nickel gained 1.2% to $14,870.
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