Metals daily

Global equities gained as investors digested the latest US CPI report. The data came largely in line with expectations, showing annual inflation accelerating to 2.9% while core inflation held steady at 3.1%. However, headline CPI rose 0.4% on the month, above forecasts of 0.3%. Rising geopolitical tensions saw the oil price gain. Gold and silver advanced, as lower inflation paves way for rate cuts. Renewed supply issues supported metals. Yields on 10- year US Treasuries fell by 4bp to 4.01%, while the USD index was 0.3% weaker at 97.5.The Fed is poised to lower interest rates on 17 Sep in what markets expect to kick off a series of reductions that will fuel the US economy for the rest of this year. At a time of acute political pressure on US central bankers, Fed chair Jay Powell signalled his support for a pivot towards rate cuts at the annual Jackson Hole symposium in Aug. But with inflation rising on the back of Donald Trump’s tariffs and with already frothy financial markets, the danger for the Fed is that loosening monetary policy significantly will damage its inflation-fighting credibility. The Fed will initially be cautious, cutting rates by a quarter point in Sep to a range of 4 to 4.25% and signalling that it remains vigilant to deal with two-sided risks — inflation and maximum employment — for the rest of this year. In his Jackson Hole speech, Powell spelt out the stagflation challenge. “In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside,” he said. The tension between both sides of the Fed’s mandate is clear in the latest data.Precious metals ended broadly stable, with gold remaining close to record highs, as investors weighed a wave of US economic data that continue to support expectations for rate cuts. The CPI report did little to shift market expectations for a Fed rate cut next week, with investors nearly fully pricing in three cuts by year-end. Despite a 40% YTD gain raising profit-taking risks, underlying bullish drivers remain for gold. Palladium outpaced platinum. Russian drones were shot down in NATO-member Poland, driving the EU to threaten more sanctions against Russia, which supplies nearly half of global palladium.Base metals secured gains as copper consolidated its gains above the $10,000 level. Tin is continuing to outperform the rest of the base metals complex. LME net fund positioning has returned to record long levels, providing significant price support. This comes despite market participants reporting soft demand conditions and falling premiums, weakened by renewed tariff headwinds and ongoing macroeconomic uncertainty. On the supply side, increasing shipments from Wa in the coming months pose a downside risk. However, Indonesian exports have stuttered after a strong H1 recovery, with major smelters still awaiting updated quotas or licenses - potentially further motivating tin bulls in the short term. According to the ILZSG, the global market for refined zinc metal was in surplus by 47kt over H125, with total reported inventories decreasing by 109kt. World refined lead metal supply exceeded demand by 21kt in H125 with total reported inventories increasing by 26kt.Iron ore gained on demand optimism. Mills need to restock inventory following the peak demand period. Sentiment was also supported by reports that Rio Tinto is facing pressure from the Guinean government to make investments in steelmaking near its major iron ore mine, Simandou. This suggests the government is pushing back on companies that are focused on exporting raw materials.