Metals daily

What's Moving Markets?

Global equities mostly edged higher. On the data front, the JOLTS report showed the number of job openings fell to the lowest since Sep while factory orders declined 1.3%. Investors eagerly await the closely watched jobs report due Friday. A federal appeals court deemed Trump's tariffs illegal, requiring suspension by 14 Oct. Trump will appeal to the Supreme Court, possibly leading to a prolonged legal battle. Tariffs of 10% to 50% were imposed last month. A ruling against them may necessitate renegotiating recent trade deals, potentially disrupting global trade. Donald Trump said his administration would ask the Supreme Court for an expedited ruling to overturn a federal court decision that many tariffs were illegally imposed. A weaker USD helped boost investor appetite across the commodities complex. Signs of stronger demand supported metals prices. Gold rallied to a record high amid strong investor demand. Yields on 10-year US Treasuries fell by 6bp to 4.21%, while the USD index was 0.4% weaker at 98.1.

Precious metals rallied as fiscal concerns, renewed trade tensions and persistent geopolitical risks lifted safe-haven demand. Support also came from expectations of a Fed rate cut later this month, with markets pricing a 92% chance of a 25bp move. Geopolitical risks intensified after President Xi Jinping warned the world faced a choice of “peace or war” and “dialogue or confrontation” during a military parade. With gold making new all-time highs, ETFs recorded the strongest weekly inflows since mid-Apr, amid increased expectations of a Fed rate cut in Sep. So far in 2025, ETFs have added 326t of gold - almost identical to the 331t sold over the past two years combined. The reversal underscores a broadening of the bid beyond central banks and momentum-focused traders, adding depth to the rally. Central banks bought a net 10t of gold in Jul, based on reported data - the lowest level of monthly buying since Dec. Despite this slower pace of net buying, central banks' interest in gold remains firm. Latest IMF data showed that Bank Indonesia reduced its gold reserves by 11t in Jul. The PGMs were supported by expectations of market deficits.

Base metals edged higher, with copper within touching distance of the $10,000 level. This was aided by reports from China that new policies could boost demand for refined copper. Scrap metal could attract lower subsidies, and this has already prompted some recyclers to reduce their output. This will ultimately lead to an increase in demand for copper cathodes and put upward pressure on domestic prices. The UK’s FCA is expected to ask Mercuria why it is holding large tonnages of aluminium on the LME, as the exchange said it policy guards against influence of large positions on market pricing. It will also want to know what it plans to do with it and when, since the position is influencing prices of aluminium contracts, they said. Mercuria has for much of the time since May held more than 90% of aluminium warrants - title documents conferring ownership. As of 2 Sep, LME data showed its holdings of available or on warrant aluminium amounted to more than 421kt. One company holding a large share of LME inventory suggests tight supplies and creates premiums or backwardations for short-dated contracts such as cash over the three-month aluminium contract. The global nickel hub of Indonesia has recently been hit by protests and social unrest, but its impact has so far been limited to market sentiment, and has not yet disrupted nickel mining, smelting operations and shipments.

Iron ore gained as expectations of stronger demand persisted and moves to curb overcapacity in steel. However, rallies were capped by China’s dismal Aug PMI data. Construction PMI for Aug declined sharply to 49.1, the lowest on record outside the pandemic, which reflects fading support from fiscal stimulus and a persistent decline in the property sector. The market expects China’s policymakers to apply meaningful cuts to steel production capacity in the coming months, which could provide support to iron ore prices.