Gold has rebounded and copper prices have recovered in early trading, with both moves tied to a retreat in the dollar and sliding US Treasury yields rather than fresh demand signals.
John Meyer at SP Angel said copper's recovery coincides with an acceleration in metal outflows from the Shanghai Futures Exchange, while gold's bounce reflects the fading of a dollar rally and lower yields.
Meyer flagged three macro forces shaping the backdrop: Federal Reserve policy expectations, a reversal in Japan's yen carry trade, and supply-demand shifts within China.
Bloomberg separately reported that economists have lifted their US core inflation forecasts while continuing to expect the Fed to hold rates, a combination that reinforces the case for inflation hedges and complicates the outlook for industrial metals dependent on Chinese demand.
The convergence of a firmer inflation outlook and a Fed on hold keeps the monetary policy narrative, rather than any demand shock, as the primary driver of commodity price direction.
The next significant test will be the Fed's next policy meeting and any accompanying guidance on the rate path.
