Summary
- The softer dollar and lower yields reflect a market increasingly confident in the next week's cut but still unclear about the trajectory beyond December.
- A significant pickup in copper cancellations reinforced the tightening narrative around near-term supply, prompting prices to new highs.
- Silver’s outperformance underscores its higher beta to policy expectations, leaving it more exposed to any hawkish shift from the Fed next week.
Macro
US equities opened mixed, with the Dow Jones pushing higher while the Nasdaq slipped. The key event today was the ADP Employment report, which showed private payrolls falling by 32,000 in November. Although ADP is not the Fed’s preferred labour indicator, the figure reinforced market conviction that a 25bps cut is coming next week. Both the dollar and Treasury yields reacted swiftly, with the dollar index slipping below 99.0 and the 10-year yield falling under 4.05%
Attention now turns to the policy path beyond December. We expect Powell to stress the need to re-establish a genuinely data-dependent framework, making clear that future decisions must revert to being guided by incoming economic evidence rather than market pressure.
Base Metals
Base metals jumped higher, led by copper, which surged more than 3% to test another record high of $11,520/t. The move was driven by a spike in cancelled warrants, which rose by more than 50,000 tonnes, the largest withdrawal since June’s COMEX-delivery rush, signalling renewed physical tightness and helping the cash to 3-month spread to tighten deeper into backwardation at $86/t, reinforcing near-date stress. A weaker US dollar later in the session added further momentum to prices.
TC/RC copper negotiations for 2026 have stalled, as shrinking concentrate availability continues to squeeze smelter margins. TCs could be set close to zero, and in some cases negative, while premiums of up to $300/t for Chinese smelters highlight the growing pressure on refiners to remain profitable. Any smelter curtailments in China would add another layer of risk to the already fragile copper balance, where even modest disruptions could flip expected surpluses into deficits. While 2024–25 copper balances are in thin surplus, the buffer appears small, and the market appears positioned for tightening conditions ahead. Today’s rally may be overextended in the very short term, but the broader price action underscores deepening support, with $10,830/t likely to solidify as the key floor into year-end.
As we head into the year-end, liquidity is expected to continue deteriorating into the holiday period. Combined with elevated speculative participation across the complex, this raises the risk of outsized or disorderly moves, particularly in thin markets where spreads are already tight. We remain alert to the potential for temporary upside spikes should any new supply headlines emerge.
Precious Metals and Oil
The weaker employment signal provided modest support to precious metals. Gold recovered some of Tuesday’s losses, rising towards $4,218/oz, while silver briefly touched new highs near $59/oz. Looking ahead, we expect precious metals to remain well-supported into the Fed meeting, with the balance of risks tilted to the upside as long as the dollar remains under pressure. However, with positioning already stretched, a more sustained breakout will likely require either confirmation of a dovish policy shift next week or a further deterioration in US labour data.
Oil prices edged slightly higher, with WTI around $59.4/bbl and Brent near $63.1/bbl.
All price data is from 03.12.2025 as of 17:30