Gold and copper are both benefiting from market conditions that strengthen their near-term positioning, although the drivers are different. Gold is being supported by a weaker US dollar and fading expectations for an imminent Federal Reserve rate increase, while copper is gaining from low inventories and tighter mine supply.
Gold traded close to $4,400 an ounce on Monday, with spot prices around $4,391.49 and December US gold futures at $4,448.40. The US dollar index was 0.2% lower, improving the appeal of dollar-priced precious metals for buyers using other currencies.
The main catalyst is a shift in expectations for US monetary policy. Recent economic data has pointed to softer momentum, including an unexpected decline in July nonfarm payrolls, relatively contained consumer price inflation and a 0.6% fall in July retail sales. Consumer sentiment also weakened in August.
These figures have reduced expectations that the Federal Reserve will raise interest rates at its September meeting. The implied probability of a September increase has fallen to around 30%, down from 47% a month earlier.
The Federal Reserve’s July meeting minutes are now an important near-term event. Any indication that policymakers are becoming less inclined to tighten monetary policy could reinforce the current backdrop for gold.
Tensions involving the US and Iran, uncertainty around the Strait of Hormuz, disruption affecting Russian energy infrastructure and continued developments in Gaza are keeping attention on safe-haven assets. At the same time, any impact on oil prices and inflation could influence future Federal Reserve decisions, making monetary policy and geopolitical risk closely connected drivers for gold.
Copper’s outlook is increasingly being shaped by physical tightness. London Metal Exchange copper reached a six-month high, with three-month copper around $14,360.50 per tonne. The premium for immediately available copper over the three-month contract reached as much as $478 per tonne, its highest level since 2021.
That premium is a clear sign that readily available copper is becoming more valuable. Continued shipments towards the United States and uncertainty around tariff policy have altered normal trade flows, reducing metal availability in other markets and placing greater pressure on London Metal Exchange inventories.
Mine supply is also strengthening the case for tighter conditions. Producers representing around 55% of global mined copper supply reported combined second-quarter production of 3.113 million tonnes, down 3.9% from a year earlier. Although production increased 2.7% from the previous quarter, the annual decline shows that supply growth remains difficult.
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