Summary
- With market pricing firmly entrenched, even modest shifts in Fed communication next week could trigger sharp adjustments across rates and FX.
- Copper’s relentless bull run appears more speculatively-driven, with market biased towards further gains as refined material shortage guides the speculative narrative.
- Silver’s rebound highlights its higher sensitivity to policy expectations, leaving it well positioned for further gains if the dollar weakens post-meeting.
Macro
US equities rose at the open, rounding off a week that has effectively cemented market expectations for a Fed rate cut next week. September’s inflation reading strengthened to 2.8%, but as the print matched expectations, it was absorbed positively by markets. Although we believe the delay in labour and inflation data leaves the Fed without the information normally required for a fully data-driven decision, policymakers are unlikely to move against such entrenched market pricing at this stage. We therefore expect a 25bps cut, followed by an explicit commitment to restoring a data-dependent approach once the flow of releases normalises. The dollar index held steady just below 99.0, while the 10-year Treasury yield remained firm above 4.1%.
Base Metals
Base metals remained firm on Friday, led once again by copper’s relentless bull run. Despite the cash to 3-month spread easing to around $33/t backwardation, the strength in forward prices suggests speculative flows are firmly guiding the market narrative, overshadowing incremental fundamental developments. Today’s rally pushed copper to a fresh record high of $11,650/t, with market driven more by positioning than by physical tightness alone.
With the prevailing narrative of refined copper availability running thin, we see markets remaining biased to the upside, where even modest bullish signals can trigger outsized moves. We expect price action is likely to follow a pattern of sharp spikes followed by shallow consolidation, keeping the broader bullish trend intact heading into year-end.
Meanwhile, zinc remained elevated, exhibiting sharp intraday moves but closing the day just below the $3,100/t mark, as aluminium hovered below $2,900/t. The rest of the complex held their nerve.
Precious Metals and Oil
Anticipation of next week’s cut supported precious metals. Gold climbed towards $4,250/oz, while silver recovered sharply from Thursday’s decline, approaching $58.9/oz. We expect both metals to retain a constructive tone into the meeting, with risks skewed to the upside should the Fed validate current market expectations.
Oil prices also firmed, with WTI moving above 60/bbl and Brent nearing 64/bbl, supported by improved risk sentiment and a continued softer dollar backdrop.
All price data is from 03.12.2025 as of 17:30