Dollar Pressures Precious Metals as Copper Holds High Levels

Tashkent, Uzbekistan (UzDaily.uz) — The metals market came under renewed macroeconomic pressure at the start of September, as rising tensions between the United States and Iran supported oil prices, increased inflation risks and triggered a rally in bond yields, Alpari analyst Anna Bodrova said.

For investors, this means the Federal Reserve may maintain its restrictive policy for longer and could return to raising interest rates as early as September. Against this backdrop, precious metals are correcting, while industrial metals are moving more selectively, with their performance depending not only on interest rates but also on the actual availability of raw materials.

Gold fell to around US$4,300 per ounce, hitting its lowest level in more than three weeks. Silver is trading near US$63.5 per ounce and also remains under pressure.

Geopolitical tensions would normally support safe-haven assets, but the market is currently viewing the situation differently. If the conflict surrounding Iran drives oil prices higher again, this would strengthen inflationary pressures and increase the likelihood of tougher Federal Reserve measures. In this environment, gold and silver are being hurt not by a lack of demand for protection, but by a stronger dollar and higher yields, which make non-yielding assets less attractive.

Additional uncertainty is coming from expectations for new US labor market data. Following comments from Federal Reserve officials, markets have sharply increased the probability of a September rate hike.

As a result, developments over the coming days will be important for gold and silver, alongside news from the Middle East. If economic data confirms continued economic resilience and persistent inflationary pressure, precious metals could struggle to resume growth quickly. If the data is weaker than expected, investors may again turn to gold as protection against macroeconomic instability.

Platinum and palladium have also declined along with the broader precious metals sector. Platinum is trading at around US$1,720 per ounce, while palladium is near US$1,300 per ounce.

The long-term outlook for platinum remains more resilient because of expectations of a supply deficit and demand from hybrid vehicles. Palladium appears weaker, as the growing share of electric vehicles and the substitution of palladium with platinum in automotive catalytic converters continue to limit its potential. In the short term, however, both metals are primarily being driven by the dollar, interest rates and overall risk appetite.

In the industrial metals segment, copper remains the main focus. The price is holding around US$6.45 per pound after reaching a record high above US$6.8 in August.

On the one hand, copper has pulled back from its peaks amid rising yields and concerns about demand. On the other, the metal is still up more than 40% over the past year, while its long-term outlook remains strong.

The market continues to factor in possible US import tariffs, which are prompting supplies to be redirected toward the US market. This is reducing available inventories in other regions and reinforcing perceptions of a supply deficit.

Aluminum is trading at around US$3,245 per tonne and appears calmer than copper, but its fundamentals also remain tight. Inventories at LME warehouses have fallen sharply since the beginning of the year, while supply disruptions in the Persian Gulf following strikes on metallurgical facilities continue to affect the market.

Investors expect production to gradually recover, but the process does not appear likely to be rapid. Against this backdrop, even a modest increase in demand or a new logistical disruption could push aluminum back into a stronger rally.

Zinc remains one of the strongest metals in recent months and is holding near US$3,830 per tonne. The market is responding to low inventories, production disruptions and risks to supplies from China.

Unlike gold and silver, where interest rates and the dollar play the main role, zinc is more dependent on the physical availability of the metal. This is why it appears more resilient than many other commodities despite the broader macroeconomic environment.

Overall, the metals market has once again split into two distinct dynamics. Precious metals are losing ground to a stronger dollar, higher yields and expectations of tighter Federal Reserve policy.

Industrial metals are also feeling macroeconomic pressure, but they are supported by low inventories, trade flows, supply disruptions and long-term demand from the energy, infrastructure and technology sectors.

As a result, the market can no longer be described by a single broad trend. Gold and silver are currently driven primarily by Federal Reserve expectations, while copper, aluminum and zinc are responding more to the balance between actual supply and future demand.

Anna Bodrova
Alpari analyst