Gold prices jumped slightly to a new record, rising 0.4% to $2,581.85 per ounce on Sept. 19. Investors had priced in the US Federal Reserve's Sept. 18 rate cut, but market observers expect the 50-basis-point interest reduction to drive gold bullion investment in the near term.

A lower interest rate environment means investors will see less return on the US dollar, likely driving them to put their bets on other assets, including gold. Ahead of the Fed's Sept. 18 rate cut, gold prices had already soared to new highs, with the London Bullion Market Association price closing at $2,581.20/oz on Sept. 16 in anticipation of the announcement.

"Looking at the potential gold price trajectory only from the interest rate cut perspective and assuming that the uptick was an immediate knee-jerk reaction, we could think that the cut has been baked in current levels and the gold price could have reached a resistance line," Aude Marjolin, an analyst with S&P Global Commodity Insights, said in an interview.

"However, between the social unrest surrounding the upcoming US presidential election and the heightening geopolitical risk in the Middle East as we near the one-year anniversary of the Israel-Hamas war, we expect safe-haven demand — especially by central banks — to be a key driver of the gold price," Marjolin said.

Bart Melek, head of commodity strategy at TD Securities, told Commodity Insights that gold continues to be a good hedge for investors. There has already been increased investment in gold-backed exchange-traded funds (ETFs), and that is likely to continue, Melek said.

"I think as we move on, the market is going to realize that the Federal Reserve is quite dovish, and this is pretty good news for gold," Melek said. "We suspect that the US dollar may be under a little bit of pressure down the road with rates also likely dropping across the curve over time. ... I'm still looking for $2,700-plus [gold prices] later in the year."

While other countries' central banks may act differently on rate cuts, global central banks are likely to adopt "a more accommodative stance" on average on interest rates in the wake of the Fed's decision, said Ryan McIntyre, a managing partner with Toronto-based precious metals and asset investment manager Sprott Inc.

"This, overall, will be positive for the gold price," McIntyre told Commodity Insights.

Paul Wong, a market strategist at Sprott Asset Management, said global central banks have already started a "synchronized easing cycle," with the US setting the tone as the "largest and most significant" market.

"Globally, rates will fall, but they may not be even or entirely predictable," Wong told Commodity Insights. "The global easing cycle, all else being equal, is bullish for gold."

Wong said the market will be closely watching the performance of the US dollar, which could lose support as the Fed cuts rates faster than other central banks. Wong is also watching central bank and sovereign gold buying trends for clues on next moves for the precious metal.

"So far, since April, buying from China (the world's largest gold buyer) has paused," Wong told Commodity Insights. "What we appear to have is multiple smaller central banks putting in multiple bids. The effect has been to prevent gold from selling off even though prices have been very overbought and investment funds long. When does China return?"

Some observers expect headwinds for gold. Joseph Cavatoni, a market strategist covering North America for the World Gold Council industry association, told Commodity Insights that, despite favorable conditions for gold as a strategic asset, investors should be mindful to look beyond the news of the Fed's "long-awaited rate cut."

"We may see price volatility in the short term over the next several weeks, but the impact of the rate cut will need to be fully digested by the market. That's when we will be likely to see increased demand taken up by the investor community, particularly in Western markets," Cavatoni said.

"Looking holistically on a global scale, the upside impact for gold from the rate environment is balanced out by slowing of jewelry demand and slight slowing [of gold purchases] from central banks — all of which are key drivers for gold demand," Cavatoni said.

McIntyre said US politics will also likely move the gold price as the November election approaches. The potential for a shift in control of the White House and the rest of the federal government injects an air of uncertainty in financial markets, which is generally positive for gold price performance.

"In addition to the usual economic factors, the biggest thing to watch out for is the US presidential election," McIntyre said. "The great thing about gold is that you don't have to be a political expert, as both candidates are likely to be favorable for gold."

 

The US Bureau of Land Management published a final environmental impact statement Sept. 19 for Ioneer Ltd.'s proposed Rhyolite Ridge lithium-boron project in Nevada, the final requirement prior to approving the mine that could become a major lithium source for electric vehicle batteries in the US.

The Bureau of Land Management (BLM) applauded the project in a news release as "another step by the Biden-Harris administration to support a responsible domestic supply of critical minerals to power the clean energy economy."

The Biden administration has prioritized establishing a domestic supply chain for rechargeable batteries, and Rhyolite Ridge could produce an average of 20,600 metric tons of lithium carbonate per year over a 26-year mine life, according to a feasibility study completed in April 2020. An updated resource estimate completed in April 2023 defined measured, indicated and inferred resources totaling 360.2 million metric tons, including 3.4 MMt of lithium carbonate equivalent.

Environmentalists expect to challenge the project in court if President Joe Biden approves it. They say the project could drive the rare Tiehm's buckwheat flower into extinction.

The EIS identified significant protections for the plant that were developed with Ioneer and the US Fish and Wildlife Service, the bureau said in its news release.

The report sets in motion a 30-day public review period before a record of decision can be issued.

 

In the monthly Commodity Briefing Service (CBS) report, S&P Global Commodity Insights discusses the copper market within the broader macroeconomic environment and provides five-year supply, demand and price forecasts.

Access the Copper CBS September 2024 databook.

➤ The London Metal Exchange three-month (LME 3M) copper price dropped to $8,980 per metric ton Sept. 3 on weak manufacturing data in China and the US before rebounding to $9,425/t Sept. 18 on a softer dollar and improving demand in China.

➤ We have downgraded our concentrate market forecast from a deficit of 219,000 metric tons to 80,000 metric tons in 2024, partly due to production suspension at Daye Non-ferrous Metals Co.'s Hongsheng smelter in China following a fire incident Sept. 14.

➤ We expect prices to gain upward momentum from a fall in copper stocks and the US Federal Reserve Bank's interest rate cuts. A narrower refined copper market surplus for 2024 indicates further stock depletion in the December quarter, supporting our expected LME 3M copper price to increase quarter over quarter to $9,570/t.

Analyst comment

The LME 3M copper price reached its highest in nearly six weeks at $9,376/t Aug. 27 as fears of a recession in the US faded on data releases showing healthy growth in new orders for durable goods, while consumer confidence reached a six-month high in August. US Federal Reserve chair Jerome Powell's remarks that "the time has come for policy to adjust" signaled imminent rate cuts and weakened the US dollar, further boosting copper prices. Rising copper prices depressed spot demand, however. Weak manufacturing data in China and the US sparked economic concerns, triggering a slump in prices to $8,980/t Sept. 3. Prices rebounded to $9,238.5/t Sept. 12 on a softer dollar and improving demand in China, reflected by continuous stock decreases at the Shanghai Futures Exchange (SHFE). An interest rate reduction by the Federal Reserve further boosted the LME 3M copper price to $9,425/t Sept. 18.

In China, low scrap availability continued to buoy refined copper demand, as some cathode-fed wire rod manufacturers reported a 5% year-over-year increase in their August production. The weaker average price in August attracted heavy restocking from wire and cable manufacturers after receiving healthy orders from the grid, wind and solar power generation sectors. Although demand from the property sector and infrastructure projects remained weak, the August data from the National Bureau of Statistics of China showed an increase of 3.4 percentage points in the new order index for the construction industry, indicating a better performance ahead. Additionally, infrastructure projects could benefit from the issuance of local government special bonds, which started rising in May 2024 and reached a high of close to 800 billion yuan in August. CAAM data showed China's EV production at 1.09 million units in August, up 10.2% on the month and 29.6% higher than a year ago. The EV sector could also continue supporting near-term copper demand, as sales are traditionally strong in September and October.

In addition to robust refined copper consumption in China, reduced cathode imports due to shipment delays from Africa led SHFE stocks to fall 59,458 metric tons in August, the largest drop to date for the exchange. China's imports of unwrought copper and copper products in August fell 12.3% year over year and 5.3% from July, as Africa prioritized cold chain deliveries during the peak export season. Still, the Chinese cathode market remained well-supplied with strong domestic production. China's copper concentrate imports were up 19% compared with July, enabling smelters to produce more primary copper, offsetting shortages in secondary blister and anode supply. Rising sulfuric acid prices — an important by-product of copper smelting — incentivized smelters to ramp up production.

Platts-assessed spot treatment charges (TC) dropped $5.8 per dry metric ton month over month as of Sept. 12 due to higher demand for shipments of copper concentrate in the fourth quarter. Platts is a part of S&P Global Commodity Insights. The TC edged up recently as a fire incident forced Daye Non-ferrous Metals Co.'s Hongsheng smelter in China to keep its smelting operations suspended for at least three months. We have downgraded our concentrate market forecast from a deficit of 219,000 metric tons to 80,000 metric tons in 2024, partly due to an estimated production cut of 100,000 metric tons of copper at the smelter. With the market being less tight than expected, we anticipate that large curtailments at other primary smelters might not occur this year.

Additional copper production will come from new smelter projects. Yunnan Copper Co.Ltd. commissioned its relocated new smelter in September, with an October target for its first batch of cathode production. While JinChuan Group Co.Ltd. plans to fire up its new furnaces in Gansu province in late September, we heard the group's Jinchuan Fangchenggang smelter had already done so at the end of August. Meanwhile, we expect a less tight secondary raw materials supply in the following months, supporting cathode production, as the timing of policy changes on scrap tax rebates could be delayed to 2028. That said, China's year-over-year cathode output growth will likely be small, considering the base was high in the December quarter of 2023.

Freeport-McMoRan Inc.'s Manyar smelter project in Indonesia is on track; the project started in September and will begin producing cathode in October, with a planned output of 60,000 metric tons through year-end, facilitating a better-supplied Southeast Asian market. A positive copper price arbitrage between the SHFE and the LME attracted copper from LME Asian warehouses to flow into the Chinese market since early September. The Platts-assessed China's cathode import premium increased from $55/t Aug. 29 to $80/t Sept. 18, reflecting a healthy appetite amongst Chinese buyers.

Copper stocks at European LME warehouses were broadly stable despite small decreases. A planned overhaul of approximately 2.5 months of KGHM Polska Miedz SA's Glogow I copper smelter in Poland started Aug. 12, but the company expects limited impact on cathode output thanks to the accumulation of an adequate supply of anode copper and the production support of the Głogów II smelter. The market supply was sufficient as European demand remained lackluster, with the manufacturing purchasing managers' index (PMI) in Eurozone stabilizing in contractionary territory in August. Similarly, manufacturing activity in the US contracted at a moderate pace in the month. There has been no sign of a copper demand improvement so far in September, as the Platts-assessed US cathode premium remains flat, which aligns with feedback from US scrap traders that China demand is much stronger than that of the domestic market.

Outlook

We expect copper prices to gain upward momentum from lower stocks at the SHFE and the LME warehouses and the Fed's interest rate cuts. With strengthening China copper demand and production cuts at the Hongsheng smelter, a narrower refined copper market surplus for 2024 than our previous forecast indicates the prospect of further stock depletion in the December quarter, supporting the LME 3M copper price to rise quarter over quarter to $9,570/t.

A review of mine, smelter and refinery projects prompted us to upgrade our copper concentrate and refined copper production forecasts during 2025 and 2028. However, it has not changed the big picture of the copper industry — an overall supply deficit that is expected to support copper prices to trend upward. Copper concentrate supply shortages will not necessarily lead to a tighter refined copper market, given the strong capacity expansions in China and at overseas mines like Grasberg and Kamoa-Kakula, where operators have built smelting facilities to treat their concentrate.

Platts Clean Copper Concentrate CIF China Treatment Charge $/t is an offering of S&P Global Commodity Insights. S&P Global Commodity Insights is a division of S&P Global Inc.

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.

 

Bets that the US Federal Reserve will cut interest rates this week drove the price of gold to new highs while longer-term factors continue to support the precious metal.

The London Bullion Market Association gold price hit a record $2,574.63 per ounce on Sept. 13, ahead of an aggressive interest rate cut expected from the Fed on Sept. 18 as the labor market slows and inflation rates decrease.

"Gold typically goes up when rates move down given the opportunity cost of holding gold declines, as gold doesn't generate a yield," Ryan McIntyre, a managing partner with Toronto-based precious metals and asset investment manager Sprott Inc., told S&P Global Commodity Insights. "Additionally, rates typically go down when the economy is slowing, and gold tends to benefit from higher levels of economic uncertainty."

The Fed has not issued a rate cut since March 2020, and gold investors have been eagerly awaiting news of a pullback in recent months. A substantial rate cut could drive gold prices even higher, while a more reserved cut could disappoint investors and lead to a reversal of the recent run-up.

"A 50 bps rate cut by the Fed should be positive for the gold price," McIntyre said. "A 25 bps might disappoint slightly and in the very short term, but it should not impact the positive long-term trajectory for the gold price."

Commodity Insights has forecast the gold price averaging $2,346/oz in 2024 and $2,550/oz in 2025. Gold has already enjoyed strong support from central bank purchases and safe-haven investments driven by geopolitical and economic uncertainty.

There have also been signs that buyers of gold-backed exchange-traded funds are showing renewed interest in gold investment, which could drive gold prices upward even further.

"With ETF buying accelerating, the market pricing a higher probability of a 50 bps cut next week, the new record price which saw the yellow metal trade above $2,580/oz suggests that longs will grow, and shorts will be covered over the next few sessions," TD Securities analysts wrote in a Sept. 13 note. "The US central bank's commitment to a firm labor market and willingness to cut implies that we may well hit our $2,700/oz target ahead of time, with an upside risk."

Noting a previous high gold price of $2,529.75/oz on Aug. 20, Commodity Insights analyst Aude Marjolin wrote in a Commodity Briefing Service note released Aug. 28 that anticipated interest rate cuts have supported the uptrend in prices, but other factors also suggest higher prices through the year.

"All signs — lower interest rates, strong central bank and investor interest and geopolitics-honed safe-haven appetite — point to robust demand for gold in the coming months, which should support prices at their current levels," Marjolin wrote. "Longer term, the likelihood increases that gold prices will be sustained at an elevated level."

The ongoing Russia-Ukraine war, the potential for the Israel-Hamas war to extend into a wider regional conflict and uncertain economic outlooks for major economies, plus uncertainty around the outcome of the US election, could push up gold prices, Marjolin said. McIntyre also saw chances for rising gold prices in the long term.

"We think the gold price will perform well given the perpetual debasement of the US dollar, the tenuous fiscal situation facing many western nations, and the global trend of wanting a store of value that is independent of other assets and institutions," McIntyre said.

 

PJSC MMC Norilsk Nickel has inaugurated a battery technology center in St. Petersburg, marking the company's venture into a new sector of cathode active materials. If the operation achieves commercial production, it will boost Russia's demand for nickel, cobalt and manganese.

The center, which is effectively a lab, has already produced samples of cathode materials of NMC-811 composition. NMC-811 means the cathode contains eight parts nickel to one part each manganese and cobalt.

The next phase of Nornickel's project will comprise the construction of a pilot plant to produce 10 metric tons per year of high-nickel cathode active materials (CAM) for lithium-ion, as well as solid-state and sodium-ion batteries. Nornickel aims to make a decision on the pilot plant within a year.

Nornickel said the cobalt inputs for the CAM come in the form of cobalt sulfate produced at its Harjavalta refinery in Finland. The company has not specified whether it has restarted cobalt refining operations in Russia that were halted due to fire damaging that section of the electrolysis shop in September 2022.

According to the European Federation for Transport and Environment, an NMC-811 battery in a medium-sized electric vehicle contains about 147 kilograms of key battery metals. That includes 39 kilograms of nickel, 5 kilograms of cobalt and 5 kilograms of manganese.

Nornickel's 10 t/y pilot plant would require 2,650 kilograms of nickel and 340 kilograms of each manganese and cobalt, S&P Global Commodity Insights estimated.

The company did not specify whether its project is the first step toward becoming a CAM supplier to battery factories in development by state nuclear corporation Rosatom. However, it did acknowledge that the factories will be the center of CAM demand in Russia.

By 2025–2026, Rosatom plans to inaugurate two full-cycle lithium-ion battery production facilities near Kaliningrad and Moscow, each with a design capacity of 4 GWh or 50,000 batteries per year.

When operating at full capacity, the factories will require between 16,000 and 21,300 metric tons of battery metals, including 2,900-3,870 metric tons of nickel, 800-1,070 metric tons of cobalt and 1,000-1,300 metric tons of manganese. This assumption is based on Transport & Environment's data that a medium-sized EV with an average battery composition and a 60 kWh capacity contains 160 kilograms of battery metals, including 29 kilograms of nickel, 8 kilograms of cobalt and 10 kilograms of manganese.

The factories would boost Russian domestic consumption of nickel and cobalt, much of which is supplied by Nornickel.