Gold rebounds as rate-hike fears ease
Precious metals endured another volatile week, with gold staging a rebound after an earlier correction driven primarily by long liquidation, rising bond yields and renewed expectations of another US rate hike.
Gold jumped as much as 2.9% on Thursday to above USD 4,500 an ounce, its biggest intraday gain since 19 August, after Federal Reserve Governor Christopher Waller said he would favour leaving rates unchanged this month if incoming data confirms that inflation pressures are cooling. His comments reduced the probability of a September hike from around 65% to roughly 50%, triggering lower Treasury yields, a weaker dollar and renewed demand for bullion.
The speed of the recovery supports the view that the recent correction was primarily about reducing stretched positioning rather than investors fundamentally abandoning gold. Open interest in COMEX futures declined during the sell-off, while investment demand outside futures remains firm.
Notably, the largest bullion-backed exchange-traded fund attracted USD 1.41 billion in a single session, its biggest inflow since January, helping lift total global ETF holdings to around 3,095 tonnes, a six-month high. Central-bank purchases meanwhile continue to provide an important structural source of demand.
Attention now turns to next week’s US August CPI report, which could have an outsized impact on both rate expectations and gold. Waller explicitly linked his September view to the incoming inflation data, making the release an important test for markets after several weeks of rising yields.
From a technical perspective, gold’s rebound has brought the 200-day moving average, currently around USD 4,534, back into focus. A sustained break above this level would strengthen the recovery signal and potentially encourage fresh momentum buying.
Industrial metals remain resilient
Industrial metals have meanwhile continued to show surprising resilience despite higher global borrowing costs and periods of renewed dollar strength.
Supply constraints remain the dominant supportive force, particularly across copper and zinc, where tight availability and disruptions have offset concerns about demand and higher funding costs. Zinc recently reached a four-year high, while copper continues to trade close to historically elevated levels.
The broader message is that industrial metals are increasingly behaving as supply-constrained physical commodities rather than simply proxies for Chinese economic growth. Electrification, grid investment and the rapid expansion of power-intensive infrastructure continue to support the longer-term demand outlook, while supply has struggled to respond quickly enough.
Agriculture takes a breather
Agriculture has moved in the opposite direction this week following four consecutive weeks of strong gains. The recent rally had driven speculative positioning sharply higher, leaving several markets vulnerable to profit-taking when supportive headlines began to fade.
Across the ten major grain and soft commodity futures tracked in our weekly “Commitment of Traders” report, the combined managed-money net long jumped 546k contracts in a two-week period to 25 August, the fastest pace on record, with the total rising above 1.1 million contracts, the highest in more than four years, and representing a nominal exposure of more than USD 40 billion. The speed of the turnaround has been particularly striking, with the combined position having been close to neutral only a few months ago.
Wheat provides the clearest example. Prices retreated after Russian President Vladimir Putin raised the possibility of progress towards a peace agreement with Ukraine, prompting traders to remove some of the geopolitical premium built up during the recent surge. Yet the physical disruption has not disappeared. Asian importers have recently purchased at least 500,000 tonnes of Australian and Argentine wheat to replace delayed Black Sea cargoes, reportedly paying sizeable premiums to secure alternative supply.
Elsewhere, cocoa and coffee have also come under pressure as improving near-term supply expectations encouraged profit-taking, while cotton has weakened amid subdued demand. Sugar has been relatively resilient, supported by expectations that the global balance could tighten again during the coming season.
After the scale of the recent agriculture rally, some consolidation was probably inevitable. The underlying risks from Black Sea disruption, extreme weather and El Niño have not disappeared, but the rapid build-up of speculative longs means markets have become more sensitive to even modest changes in the fundamental outlook.