Summary
- US - China agreed to extend their trade truce for another year, leaving risk-on sentiment subdued.
- Base metals reversed recent gains, with copper retreating below $11,000/t.
- Gold and silver are showing signs of recovery, as speculative unwinding appears to have ended and fresh support levels are forming.
Macro
The US and China agreed to another truce, extending the trade agreement for another year. This extension includes a reduction in the tariff rate on fentanyl while ensuring that the flow of soybeans and rare earths continues. This marks the 3rd extension of the tariff truce, meaning that the effective tariff rate on Chinese goods has increased from 3.0% to 47.0% since the beginning of Trump's second presidential term. This situation highlights ongoing tensions rather than a resolution, as fundamental differences between the two economies remain unresolved.
Markets, however, appeared unimpressed. US equities were mixed, dropping on the open following the announcement. In contrast, the dollar index jumped higher but found resistance at an October high of 99.56, causing the index to hover just below this level by the end of the day.
From a macroeconomic perspective, the Fed cut key interest rates by 25bps during yesterday's meeting. However, Chair Jerome Powell tempered market enthusiasm by indicating that another rate cut in December may not be likely. As we mentioned in our recent comment, the lack of labour market data due to the US government shutdown makes it difficult for the Fed to implement two consecutive rate cuts, as they would lack clarity on the impact on the real economy. Still, markets appear unconvinced, with forward swaps pricing in 19bps worth of cuts for the last meeting of the year. The 2-year US Treasury yield jumped higher, approaching 3.6%, to reflect this.
Elsewhere, recent data indicated that Germany's inflation continued to cool, slowing down to 2.3% YoY in October. The longer-term trend suggests that inflation is steadily approaching the key 2.0% level. This supported the ECB's decision to keep key deposit rates unchanged at 2.0%. We believe that, as long as growth prospects do not deteriorate, the central bank has effectively paused its rate-cutting cycle.
Base Metals
The combination of a stronger dollar and record-high copper prices following yesterday's rally led markets to retrace their recent gains. Copper prices led the decline, dropping by more than 2.5% and breaking back below the key $11,000/t support level towards $10,914/t. As noted in yesterday's comment, the recent upside appears to be speculative in nature, suggesting little fundamental support for prices to remain above the $11,000/t mark sustainably. The COMEX copper, a better reflection of speculative participation in the copper market, highlights this, falling by more than 3.5% today. Still, we remain cautious that medium-term downside risks might be limited, with the support level at $10,500/t likely to hold. This level reflects the market's fundamental repricing following the removal of Grasberg's material from global supply prospects.
The rest of the base metals complex followed suit. Aluminium defended the $2,900/t resistance, falling back towards $2,863.50/t. Zinc weakened towards $3,037.50/t, maintaining the $3,000/t support.
Precious Metals and Oil
A recovery is taking place in the precious metals market, with gold's rally today catching up to silver. Silver jumped higher today, approaching the $49/oz resistance level, while gold surpassed the $4,000/oz mark once again. We believe that the recent weakness flushed out excessive speculative positioning, allowing the market to reset and build a firmer foundation for gradual, more sustainable gains. Oil futures held steady, with WTI and Brent trading at $60.45/bbl and $64.90/bbl at the time of writing, respectively.
All price data is from 30.10.2025 as of 17:30