Written Commentary
GOLD
December gold futures declined in the last few weeks, weighed down by a stronger U.S. dollar, which remains close to an 8-week high. Much of the pressure on gold is linked to strength in the U.S. dollar as market expectations for significant Federal Reserve interest rate cuts diminished following positive U.S. jobs data.
Additionally, gold faced pressure after a briefing from China, a major consumer, which provided limited details on potential stimulus measures.
Gold exchange-traded funds recorded a fifth consecutive month of inflows in September, with North America-listed funds increasing their holdings, as reported by the World Gold Council. In the Middle East, Israeli Prime Minister Benjamin Netanyahu announced airstrikes, as Israel expanded its ground operations against the Iran-backed group in southern Lebanon.
Meanwhile, China expressed confidence in achieving its annual growth target but fell short of announcing stronger fiscal measures, disappointing investors hoping for more substantial economic support.
SILVER
December silver futures are lower today after declining over 3.0% in the previous session, as investors await the latest minutes from last month’s Federal Reserve policy meeting for insights on potential U.S. interest rate cuts. Recent pressure on silver and other metals followed a stronger-than-expected U.S. jobs report last week, which caused investors to eliminate expectations for a substantial 50 basis point interest rate cut from the Fed in November.
Additionally, silver faced downward pressure after a briefing from China’s National Development and Reform Commission, which offered little new information on new stimulus measures. Silver is widely used in China’s renewable energy sector, especially in electrification technologies and solar panel manufacturing.
December silver futures are currently below a 10-day trading range, partly due to rising U.S. Treasury yields. However, any downside may be limited due to silver’s status as a safe haven amid ongoing geopolitical tensions.
COPPER
December Copper futures fell under $4.40 per pound on Wednesday after declining to a two-week low yesterday and are below a 10-day trading range. Optimism remains that China, the leading consume of copper, could eventually announce more stimulus measures. However, copper prices declined over 2.0% on Tuesday after the National Development and Reform Commission in China indicated that no additional stimulus measures would be forthcoming, which disappointing investors. Chinese officials revealed plans to accelerate the issuance of special purpose bonds to bolster economic growth.
China’s finance ministry is expected to hold a press conference on fiscal policy this Saturday. There is some optimism that copper prices will increase in the coming months due to the potential for additional stimulus from China.
China’s new yuan loans likely jumped in September from August, as the central bank ramps up stimulus to drive the economy and towards this year’s growth target. Banks likely issued 1.87 trillion yuan ($264.75 billion) in net new yuan loans in September, according to the median of 16 economists’ estimates. That would suggest more than double August’s 900 billion yuan but would fall short of the 2.31 trillion yuan issued in the same month a year ago.
In an effort to support the economy, China’s central bank in late September unveiled its most aggressive monetary stimulus package since the COVID-19 pandemic, coupled with extensive property market supports including mortgage interest rate cuts. Chinese leaders also pledged to deploy “necessary fiscal spending” to meet this year’s growth target of around 5.0%.
Strength in the U.S. dollar remains a risk to the upside for copper prices.
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