Written Commentary
PRECIOUS METALS
Gold: December gold contracts fell lower on a wave of profit-taking ahead of tomorrow’s PCE data. Forecasts are expecting headline prices to rise 0.1% MoM and core prices to rise 0.5% MoM. Another in-line reading is likely to see yields fall and expectations of a September rate hike wane, which would be supportive of the outlook for gold. The market also showed little to no reaction to Washington’s push for tighter sanctions against Iran and the ongoing trade spat with Canada, leaving PCE and the Fed’s Jackson Hole Symposium to be the main drivers of price action this week.
Initial gains from the Treasury Department’s buyback announcement has faded, though continues to offer support in the form of the debasement trade. If the market cannot naturally lower bond prices at the long-end and price risk premium, traders will adjust by depreciating the dollar. Additionally, the administration is unlikely to address the underlying problem, being the large deficit and rising debt. Persistent inflationary worries have also compounded these dynamics as traders have begun to look to other stores of value amid a rotation away from securitized assets.
Markets are pricing a 40% chance of a hike next month and see 26 bps of total tightening by year end. With no end to the US-Iran impasse in sight, oil supply from the Middle East will remain disrupted, keeping inflationary risks skewed upward. The risk backdrop is little changed with oil and yields still elevated and a US-Iran deal unlikely in the near term, keeping risk premium and inflationary worries elevated.
Silver: September contracts are down 1.58% to $67.50.
BASE METALS
Copper: Copper prices on the LME added 0.2% to $14,296, while COMEX prices were little changed at $6.61. Low inventories and ongoing supply worries are likely to continue to underpin prices, with the recent pullback suggesting a wave of profit-taking than any sort of change in fundamentals. Available copper in LME warehouses had fallen nearly 50% in between June and mid-August, though stocks have since climbed by 17%. That rebound has lowered the premium of the cash contract to the three-month forward from $545 in mid-August to $71. However, inventory remains low and around 55% of the total metal in the LME system are on cancelled warrants.
Zinc: Zinc added 0.4% to $3,852.
Aluminum: Aluminum fell 0.7% in official activity to $3,205.
Tin: Tin rose 0.3% to $55,900.
Lead: Lead was little changed at $1,911.
Nickel: Nickel lost 0.6% to $16,920.
Interested in more futures markets? Explore our Market Dashboards here.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
