Summary
- US stocks opened higher, despite the government entering a shutdown period.
- The ADP employment change report showed the lowest figures since early 2023, increasing pressure on the Fed to cut rates in the upcoming two meetings.
- Base metals are showing signs of stabilisation as earlier volatility begins to ease.
- Gold continues to stand out as markets seek to hedge against political, fiscal, and economic uncertainty, while silver follows suit, reaching $47.50/oz.
Macro
US stocks opened higher today as positive economic data reinforced expectations for the Fed's interest rate cuts. The ADP employment change, which was forecasted to show an increase of 51,000 jobs in September, instead reported a negative figure of -32,000. This marks the lowest employment change since March 2023 and further dampens sentiment surrounding the US labour market.
The positive sentiment in equities is being driven by ongoing hedging against a weaker dollar, which is under pressure due to rising expectations for consecutive interest rate cuts by the Fed. Currently, forward swaps anticipate cuts totalling 48bps for the remainder of the year, an increase from 40bps earlier this week.
In the background, news of the US government officially entering a shutdown has begun to emerge. This is the first time since the 2018-2019 period that Congress has missed the midnight deadline for funding approval for the fiscal year. While the duration of the shutdown is uncertain, the previous shutdown lasted over a month. Some administrative activities, such as federal courts and air traffic control, are likely to continue, but economic data collection and reporting may experience delays or missing reports. With an estimated 750,000 federal employees expected to be furloughed during this time, labour figures are likely to deteriorate further, which could intensify expectations for two 25bps rate cuts from the Fed in October and December.
As a result, pressures on the dollar continue to mount, leading to its decline for the fourth consecutive day, with it falling to 97.50. Meanwhile, the 10-year US Treasury yield remained steady at 4.12%.
Base Metals
Base metals showed signs of stabilising, as the volatility experienced earlier this week began to ease. Copper recorded intraday trading, maintaining ground above the $10,200/t level at $10,379/t, while aluminium continued to edge higher, approaching the $2,700/t resistance level. Lead and zinc were also higher, with the former breaking back above the $2,000/t level to $2,010.50/t, as zinc is trading above $2,950/t mark. Tin is the only exception, as it continued to break significantly higher, breaching the $35,500/t resistance level to reach an April high of $36,013/t.
Precious Metals and Oil
Oil futures continued to decline as markets digest news of potential OPEC+ output increases, prompting WTI and Brent to soften into $61.90/bbl and $65.50/bbl, respectively.
Gold continues to stand out as one of the few assets that can help investors hedge against uncertainties related to fiscal, political, and economic factors. Additionally, the ongoing purchases of gold by central banks and ETFs bolster the demand for the bullion. As of now, gold prices are at $3,870/oz, marking another record high. While any positive news from the US could result in a correction of gold prices, we expect it to be modest, with strong technical and fundamental support established at $3,340/oz.
In contrast, we believe that recent silver purchases were more speculatively driven, tended to rise particularly during profit-taking days for gold. As of today, silver is attempting to break above the $47.76/oz, currently hovering just below it at $47.60/oz. For silver, there is solid technical support at $35/oz, which implies that if we experience a correction in both gold and silver, the expected declines toward these support levels would be approximately 15% for gold and 34% for silver.
All price data is from 01.10.2025 as of 17:30