Profit Taking Ahead of Labor Data

PRECIOUS METALS

Gold: Gold prices moved lower as a wave of profit-taking took over the metals complex following a strong rally since the beginning of the holiday period. Additionally, a stronger dollar also weighed on prices, though in recent sessions, metals have moved in line with dollar strength. ISM Services PMI data for December and the JOLTS Job Openings report set for release later in the morning are likely to add to clues on underlying economic momentum and the health of the labor market. Safe-haven buying remains in place as traders position themselves ahead of Friday’s labor report, which is likely to have strong implications on shaping Fed policy in 2026.

Gold prices enjoyed favorable conditions to start the week on Monday as safe-haven buying led prices higher, while the metals complex is broadly rallying on the theme of critical minerals and security of supply chains, which have come into focus following the events in Venezuela. Markets have largely shrugged off the US military action that saw the removal of longtime Venezuelan president Maduro. However, a lack of further escalation and cooperation between the US and Venezuela diplomatically limits any broader geopolitical risk.

A potential notable event on Friday could be the Supreme Court’s ruling on Trump’s tariffs, for which prediction markets are placing an unfavorable outcome for the Trump administration. Polymarket odds are pricing a 70% chance of an unfavorable ruling for the administration in the case. The Supreme Court announced that it would issue a set of opinions on Friday, though it did not disclose what cases it would be ruling on. This has raised expectations that the administration’s case regarding the legality of the global tariffs imposed by the administration could be on the docket. An unfavorable ruling could lead to volatility in the bond market, as tariffs are expected to lower the national deficit by $3 trillion over the next ten years.

Fed Funds futures are favorable to a rate cut from the Fed in April or June, followed by another reduction in September or October, while the Fed’s latest dot plot suggests that policymakers expect just one cut in 2026.

Silver: Silver prices are down 5.5% to $76.64 as profit-taking pressured the metal. Silver has been benefitting from safe-haven buying and increased investor attention. The gold-silver ratio is hovering near 57 after plummeting from 81 in late November, hitting its lowest level since August of 2013. Since 2022, the gold-silver ratio has largely maintained a range between 75 and 95 but shot to as high as 105 in April as gold prices soared and silver remained relatively subdued, in part thanks to weak retail investor attention and global economic slowdown worries, which weighed on silver’s industrial demand side.

Platinum: Platinum is down 7% to $2,263. Recent support for the metal has come from a recent pivot by the European Union on its 2035 combustion-engine ban, a tight supply backdrop, and rising investment demand. Platinum and palladium are both used in cars to reduce exhaust emissions. The EU’s extension regarding the delay of its engine ban is indefinite and will also require stricter emission standards, which could require higher platinum and palladium contents in exhaust systems.

BASE METALS

Copper: Copper prices fell from record highs reached on Tuesday, which saw LME copper hit $13,387.50. Benchmark three-month copper on the LME was down 1% to $13,105. Mine disruptions, including an accident at Freeport-McMoRan’s Grasberg mine in Indonesia in September and a strike at Capstone Copper’s Mantoverde copper and gold mine in northern Chile, have reinforced the theme of shortages. However, the mine only produces between 29,000 and 32,000 metric tons of copper a year, which is only a fraction of global mined output.

Still, for traders it reinforces recent worries over supply shortages, as many copper mines have faced serious setbacks and delays in 2025, which has stemmed production. Copper demand is expected to rise about 3% in 2026, thanks in part to AI data center infrastructure demand, which is likely to land copper in a 300,000 – 400,00 ton deficit for the year. Many existing mines have been run at or well beyond their capacity for many years, which has consequently led to several mine failures, as seen in 2025. Elevated copper prices are likely to spur investment in the industry to generate new production, but the structural issues in place are hard to pass and likely to support prices for some time. However, the high prices have dented some appetite for copper in China. The Yangshan copper premium, a gauge of Chinese consumers’ appetite for imported copper, declined to $43 a ton on Monday, down from above $50 by the end of 2025.

Elsewhere, LME stocks stand at about 142,550 tons, which puts the figure down 55% since late August as flows of the metal head to the US in anticipation of expected tariffs on the metal. Meanwhile, demand in China, the world’s biggest metal consumer, remains higher than originally expected, with January-November imports down only 3% year-over-year.

Zinc: Zinc slipped 1.4% to $3,207.

Aluminum: Aluminum dropped 0.5% to $3,112, still holding above the $3,000 level for the first time in over three years following the shutdown of the Mozal smelter in Mozambique. Supply constraints have also been strained from the EU’s new carbon tax, which consequently has reduced the flow of the metal into the trade bloc. Additionally, China announced a 45 million-ton output cap, which has fueled some supply shortage concerns.

Tin: Tin dipped 0.1% to $44,475.

Lead: Lead lost 0.5% to $2,065.

Nickel: Nickel was up 0.6% at $18,625. Nickel has found recent support following an announcement from the Indonesian government that proposed cutting nickel ore output by a third in 2026. Indonesia’s mining minister recently announced that the country would be reducing mining quotas in an effort to support prices.  LME nickel stocks climbed to 275,634 tons, the highest since June 2018, after 20,760 tons of inflows. Meanwhile, the discount of the cash LME nickel contract over the three-month forward widened to $202 a ton on Tuesday, implying no pressing need for near-term metal.

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