Metals Focus on Fed this Week

Precious Metals

Gold: Gold futures are little changed but found support following a surprisingly weak NY Empire State Manufacturing reading that saw the index fall to -8.7 vs. expectations of 4.3. Traders have likely refrained from entering in new positions ahead of the Fed’s policy meeting this week, where it is widely expected that the bank will cut rates by 25 bps. Fed funds futures have priced in a 100% chance of a rate cut in September, and a 84.5% chance of an additional rate cut at the following meeting in October. Markets will analyze Fed Chair Powell’s remarks for policy guidance on the direction and pace of future rate cuts. Expectations of continued policy easing from the Fed will provide support for precious metals, while any hints at a slow pace of easing will likely act as a slight headwind. Before the Fed’s announcement, attention will be on US retail sales and industrial production data, which could offer more signals on the strength of the American economy and the central bank’s scope for additional rate cuts.

The Trump administration on Sunday renewed its request to a federal appeals court to fire Fed Governor Lisa Cook, heightening concerns over the Fed’s independence. Markets will also closely watching the US–China trade talks in Madrid, which started on Sunday. Geopolitical risks also underpinned demand for safe-haven assets, as US President Donald Trump urged the EU to impose tariffs 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.

Central bank purchasing of gold also remains supportive of prices. 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 easing in US interest rates could offer further support.

Silver: Silver futures fell lower as markets await the Fed’s policy decision on Wednesday. Central banks in Canada and China are also expected to ease policy this week, while counterparts in Japan and the UK are likely to stand pat. Industrial demand from solar, electric vehicles and electronics has also kept the physical silver market tight, with supply constraints continuing to underpin prices.

Platinum: October platinum contracts fell 0.6% to $1,403.

BASE METALS

Copper: Copper prices held steady at the LME with three-month copper edging up 0.1% to $10,73 earlier this morning while US futures rose 0.3% following a slate of weak data from top metals consumer China. Data showed growth in China’s retail sales, industrial production, and investment all slowed, while unemployment ticked up as the housing market continues to struggle. On the macro side, sentiment has been lifted by expectations of looser US monetary policy, with softer labor data and moderate inflation fueling bets on deeper rate cuts from the Fed. Markets will also monitor US-China trade talks happening in Madrid.

Retail sales in China increased 3.4% from a year ago in August, according to the government data, down from 3.7% growth in July and below economists’ 4.0% forecast. Industrial production rose 5.2% last month, compared with 5.7% in July and expectations of 5.8% growth. Fixed asset investment increased 0.5% in the first eight months of the year, compared with a 1.6% year-over-year rise in the January-to-July period and expectations for 1.3% growth. China’s urban surveyed unemployment rate came in at 5.3% last month, edging up July’s 5.2%. Meanwhile, factory-gate prices have been in contraction for nearly three years, with producer prices dropping 2.9% on year in August. Consumer prices have also hovered around the flatline.

Zinc: Zinc fell 0.2% to $2,950.50. LME registered warehouse stocks fell to 50,525 tons from 50,625 tons on Friday. Stocks have dropped around 75% since the middle of April. Cancelled warrants or zinc earmarked for shot up to 17,475 tons from 15,200 tons on Friday. Cash prices continue to see a premium over three-month prices, with cash prices roughly $23 higher per ton, as worries about the supply of zinc linger.

Aluminum: Aluminum rose 0.2% in official activity to $ 2,694 a ton.

Tin: Tin fell 0.70% to $34,725.00.

Lead: Lead fell 0.6% to $2,005.50.

Nickel: Nickel added, up 0.5% at $15,460.00.

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