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[MARKET ANALYSIS] Spot XAU nears USD 5600/oz while copper prices surge beyond USD 14k/t on greater AI demand

The recent moves in precious metals and copper prices are driven largely by a weaker dollar following the FOMC's steady rate decision.

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[MARKET ANALYSIS] Spot XAU nears USD 5600/oz while copper prices surge beyond USD 14k/t on greater AI demand

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  • Precious metals continue their surge higher, with spot XAU topping just shy of USD 5600/oz, aided by the weaker dollar following the FOMC policy announcement. Despite the Fed holding rates steady and a seemingly-hawkish shift in the statement, the desk notes that the possibility of Waller voting for a cut (potentially putting himself back in the running for Fed Chair), the absence of a new Chair replacement hinting that President Trump is allowing for Fed independence and Chair Powell saying rates are at the higher-end of the neutral range (allowing room for more cuts), point to a softer dollar.
  • Alongside gold, spot silver has also peaked to a new ATH of USD 120.43/oz but is currently underperforming compared to the yellow metal. This comes contrary to what has been seen recently, with spot silver usually leading the way. UBS notes that reduced inflows into ETFs and net speculative futures positions on the US COMEX exchange hint of a possible end of the trend in XAG.
  • Copper prices surged at the start of Asia-Pac trade, with 3M LME Copper breaking its prior ATH of USD 13.41k/t to a new peak of USD 14.12k/t. Despite the lack of a clear driver at the time, expectations for stronger US growth and greater build out of AI infrastructure remain a key driver for the red metal. This rise also comes before China's Lunar New Year holiday, resulting in the usual frontloading of copper and other metals ahead of the holiday season.
  • Glencore (GLEN LN) and Antofagasta (ANTO LN) released their FY26 copper production guidance, with both Cos indicating strong production throughout the year. Glencore raised their guidance to 951.6kt (prev. guided 810-870kt), while Antofagasta maintained its guidance but commented that "copper's outlook remains compelling."
Context

The surge in gold and copper, the latter reaching an all-time high, reflects heightened demand, particularly linked to expectations around AI infrastructure, suggesting a robust growth outlook. This environment likely positions commodities as a strong investment amidst shifting monetary policy and increasing industrial demand.

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