Metals remain under pressure as investors focus on higher financing costs, a stronger US dollar and broad-based risk reduction across financial markets.
Gold and silver prices continue to be weighed down by expectations that US interest rates will remain elevated for longer, even though several longer-term factors supporting these metals remain unchanged. Copper has fallen towards key support levels despite ongoing inventory drawdowns and constructive medium-term supply prospects.
In our view, markets may be approaching the peak of their hawkish positioning, as falling energy prices ease inflationary pressure and reduce the need for further monetary tightening.
As Ole Hansen, Head of Commodity Strategy at Saxo Bank, explains, industrial and precious metals remain on the defensive as financial markets continue to adjust to the prospect of higher financing costs and a more restrictive monetary policy stance in the United States. The latest wave of selling was amplified by a sharp correction in technology stocks. The 10% decline in the technology-heavy KOSPI index and Nasdaq’s return below the 30,000-point level triggered a broad reduction in risk exposure across asset classes.
This weakness shows that metals are currently being traded primarily as financial assets rather than commodities. Although long-term demand and supply fundamentals remain broadly supportive in several market segments, investors are currently focused on capital preservation amid rising volatility, higher bond yields and a stronger dollar. In simple terms, the market is placing greater importance on the cost of money than on the availability of metal.
Gold struggles to regain momentum
The recent rebound in gold prices proved short-lived, with quotations once again moving towards the key USD 4,000 level. The main obstacle remains the revision of US interest-rate expectations following last week’s hawkish FOMC meeting.
The combination of higher bond yields, a stronger dollar and expectations that rates will remain elevated for longer continues to limit demand for non-yielding assets. Although higher gold prices are still expected by the end of the year, several major investment banks have lowered their gold forecasts in recent weeks, reflecting a more cautious stance towards the precious metal in a higher-for-longer interest-rate environment.
From a technical perspective, the USD 4,000–4,100 range remains crucial. A sustained break below this area could trigger another wave of capitulation and momentum-driven selling, following what has already been a significant correction from this year’s highs.
Silver is performing even worse than gold. The gold-to-silver ratio has risen to a three-month high of around 66, highlighting silver’s dual nature as both a precious and industrial metal. While gold continues to attract some defensive demand, silver faces additional pressure from concerns about global economic growth and weaker sentiment across industrial metals more broadly.
Copper under macro pressure despite supportive fundamentals
Copper has not escaped the broader risk-off environment. Prices for high-grade copper have declined sharply and are once again approaching an important support level near USD 6.15 per pound. The decline has occurred despite the lack of evidence of any significant deterioration in the physical market.
Visible inventories on major futures exchanges continue to fall, while long-term demand forecasts linked to electrification, investment in power grids, data centres and the energy requirements of AI-driven solutions remain supportive.
However, copper is suffering from the same macroeconomic factors weighing on most cyclical assets. Investors are reducing exposure to sectors sensitive to economic growth amid concerns about tighter financial conditions and slower business activity. The correction in technology stocks has only added to this pressure.
Over the past two years, copper has become increasingly associated with electrification, AI infrastructure and rising energy demand. As a result, periods of weakness in technology and growth assets are increasingly spilling over into industrial metals as well.
The current correction is a reminder that even markets supported by strong fundamentals remain vulnerable when financial conditions tighten and investors reduce risk across their portfolios.
Why markets may be nearing peak hawkishness
Although the market is currently focused on the risks associated with higher financing costs, there are growing arguments that the current cycle may be approaching the peak of its hawkish stance. The most important factor is the clear decline in energy prices.
Since the signing of a temporary US-Iran agreement and the gradual reopening of shipping routes through the Strait of Hormuz, oil prices have fallen sharply. Refined fuel prices have also declined, removing one of the key inflation risks that had dominated market thinking only a few weeks ago.
Lower energy prices tend to feed through to the wider economy relatively quickly. They reduce transport costs, ease input-price pressure across industry and help cool inflation expectations. In turn, this may challenge the market assumption that the Federal Reserve will need to maintain an exceptionally restrictive stance for an extended period.
The recent sharp increase in speculative long positions in the US dollar also suggests that a substantial part of the hawkish narrative may already be reflected in current market positioning. Should upcoming inflation data begin to soften alongside falling energy prices, the dollar may struggle to sustain its recent gains.
Such a development would be supportive for both precious and industrial metals. Gold would benefit from lower real yields and a weaker dollar, while copper and silver would likely gain from improved market sentiment and expectations that financial conditions may become less restrictive.
Long-term support remains in place
Although the current correction is painful, it is important to distinguish between short-term market drivers and long-term fundamentals. In the case of gold, central-bank demand, persistent fiscal concerns, high debt levels and geopolitical uncertainty continue to provide support.
For silver and copper, the outlook remains underpinned by electrification, renewable-energy investment, the expansion of power grids and rising demand from data centres and AI infrastructure. These themes have not disappeared. They have simply been temporarily overshadowed by concerns over monetary policy, financing costs and risk appetite.
Those factors may continue to dominate in the short term, especially as some previously strong segments of the equity market undergo consolidation. However, if energy prices continue to decline and inflationary pressure eases, attention may gradually return to the fundamentals that still support the metals complex over the medium and long term.
“The current behaviour of metals shows that the market first prices the cost of money and liquidity conditions, and only later returns to supply and demand fundamentals. In such an environment, even assets with strong long-term arguments may remain under pressure for some time if investors reduce risk across their portfolios. This is why broad diversification is crucial, as it helps limit the impact of individual macroeconomic shocks on the overall allocation. From an investor’s perspective, what matters today is not only the direction of price movements, but also the resilience of the entire portfolio to changing market conditions,” says Aleksander Mrózek, Manager of Key Client Relations for the CEE region at Saxo Bank.
