Gold Surges to Record Highs Amidst Rate Cut Expectations and Geopolitical Uncertainty

The Commodities Feed: Gold hits record highs

Gold prices jumped above US$2,100/oz, surpassing their previous highs made in August 2020 on growing expectations for US rate cuts next year. A weaker US dollar and lower treasury yields, along with increased geopolitical uncertainty, are prompting the higher prices. We also look at what else is making news this Monday in commodities.

 

Metals – Gold rises to record highs

Spot gold prices jumped to record highs of US$2,135/oz this morning on rising expectations of easing monetary policy in the US before paring most of those gains. The latest comments from Fed Chair Jay Powell suggest that monetary policy in the US is “well into restrictive territory”, leaving the market speculating that the Fed might start trimming interest rates early next year. Meanwhile, an easing US dollar and extended weakness in the treasury yields continue to support the buying sentiment for gold. Looking at the speculative positions, the latest CFTC data shows that the money managers increased their net longs in COMEX gold by 29,516 lots for a second consecutive week, leaving them with a net long of 144,410 lots as of last Tuesday, at the highest level since 9 May. The speculative buying interest for gold is likely to continue in the near term, given the ongoing geopolitical tensions and expectations of lower interest rates in the US.

In copper mine supply, First Quantum Minerals has suspended production guidance for the Cobre Panama mine for 2023. First Quantum stopped commercial production at the mine last week after the Supreme Court of Panama ruled against a contract between the government and the mining company. It is estimated that the mine holds around 1.5% of the share of the global copper mined supply. Meanwhile, the latest data from Fastmarkets show that treatment charges for copper paid by Chinese smelters have dropped below US$70/t for the first time since August 2022, indicating a tightening ore supply.

The LME data shows that cancelled warrants for copper increased by 5,359 tonnes to 34,525 tonnes as of Friday, the highest since 20 July. Most of the increments were reported from New Orleans warehouses. On-warrant inventories for copper dropped by another 6,350 tonnes for a seventh straight session to 139,725 tonnes at the end of last week, the lowest since 12 September. The LME cash/3m spread for copper tightened to a contango of US$72/t as of Friday, compared to a contango of US$77/t a day earlier.

In China, the recent data from the Shanghai Futures Exchange (ShFE) shows that copper stocks fell sharply by 9,729 tonnes (-27% WoW) over the last week to 26,149 tonnes as of 1 December, the lowest since May 2009. Among other metals, zinc stocks decreased by 3,425 tonnes to 34,541 tonnes (lowest in over a month), while lead and aluminium inventories rose by 15.6% WoW and 1.3% WoW, respectively, as of Friday.