Macro Forces Drive Divergence Between Precious and Base Metals

Silver surged by over 7% on Wednesday, while aluminium slid to its lowest level in two months, marking a stark contrast between precious and base metals as Q3 came to a close.

The divergence is attributed to macro forces driving the split, with four drivers explaining the disparity: Federal Reserve policy uncertainty, dollar strength, rising inventories and contango, and energy cost pressures.

Precious metals such as gold, silver, palladium, and platinum posted strong gains, while base metals like aluminium, zinc, lead, and tin declined. Copper was an exception, climbing 2.72% despite the bearish trend in its peers.

The aluminium selloff is particularly notable, with a potential support band at $3,100-$3,125/tonne identified by Marex. A break of this level could trigger systematic selling pressure.

Looking ahead to Q4, several variables will influence commodity prices, including Federal Reserve decisions and the dollar's strength.