Insights on U.S. Inflation Impacting Metals Market

After seven consecutive months of decline, U.S. consumer core inflation showed a pause at 4% in November 2023, holding steady from October 2023. This unexpected pause raises questions about the trajectory of inflation in the U.S. economy and also impacts Base Metals. Let’s delve into this article and see the impact on base metals thoroughly:

Impact on Metals

The off-warrant report from London Metal Exchange showed that overall unreported stockpiles had increased significantly, to their highest level in two years. This growth was led by zinc and Aluminium.

Stabilization in Base Metals

Base metals saw some buying activity as they recovered some of the losses. Copper gave up all of the gains on 12th December 2023 and plummeted to $8330 after first rising. Even though other metals witnessed decreases

Vulnerability on the Horizon

All base metals, including copper, are vulnerable indicating significant losses in the coming weeks. Despite a rebound in November 2023, the decline that has been in place since Q2 2022 has not changed.

Intra-day Dynamics and Year-End Expectations

Metals intraday price ranges are shrinking as the end of the year approaches. The expectation of lower traded volumes beginning after 16th December 2023, following the end of Central Bank meetings, signals a probable slowdown in market activity.

Market Outlook

A continuation of the current year’s slowdown in demand and postponed changes to supply might push copper prices to $6800–7000, Aluminium to $1800–2000, zinc to $2000–2050, lead to $1850–1950, nickel to $14,000–14,500, and tin to $18,000–18,500 in the future year.

OFB’s Insight

Both buyers and sellers are worried about making significant investments ahead of the year’s finale. While the intraday dynamics may favour the bears, the longer-term picture suggests that price movement may calm down. The changing economic backdrop and market dynamics will have a significant impact on the future trajectory of base metals.