COPPER
March copper futures remained firm on Friday following limited gains earlier in the week, recovering from a three-month low reached on December 20th. This rebound was supported by a slight decline in the U.S. dollar, while markets evaluated the outlook for Chinese industrial demand.
The latest PMI data revealed Chinese manufacturing activity only slightly expanded in November, showing limited impact from the substantial monetary easing initiated in September. Also, the outlook for Chinese manufacturing faced pressure from potential tariff threats by the incoming Donald Trump administration, which dampened demand from the world’s top copper consumer.
GOLD
February gold futures are lower on Friday and gave back all of the previous day’s gains in light trading. Recent moderate U.S. PCE inflation data cast doubt on expectations for limited Federal Reserve interest rate cuts next year, increasing the possibility of further interest rate reductions, which could benefit gold as a non-yielding asset.
Underlying support for gold remains due to gold’s appeal as a safe haven asset. There is ongoing support for gold in light of rising geopolitical risks from the ongoing Ukraine-Russia conflict and tensions in the Middle East. Gold is still on track for an Impressive 27% annual gain, which is its best performance since 2010, driven by central bank purchases, geopolitical uncertainty, and monetary easing by major central banks.
SILVER
March silver futures declined and are trading at the lowest level in five days. Price gains earlier this week can be attributed to the recently reported softer-than-expected core PCE prices for November, which eased concerns about an overly restrictive Federal Reserve interest rate policy, which had been fueled by hawkish projections from members of the Federal Open Market Committee. This led to temporary lower U.S. Treasury bond yields and supported precious metals.
However, silver’s performance continued to lag behind gold due to an uncertain outlook for silver’s industrial demand. Overcapacity in China’s solar panel industry prompted photovoltaic companies to join a government self-discipline program, which could regulate supply and dampen the prospects for silver input demand. In addition, pressure came from the potential risk of a yuan devaluation, driven by China’s more relaxed monetary policy, which led to reduced asking prices from the world’s leading exporter.
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