Metals slid as dollar strength, China’s clampdown on high-frequency trading, and hawkish Fed signals pressured prices, offsetting strong industrial demand and keeping markets cautious globally.
Metals—both precious and base—lost some luster on Thursday, dragged lower by a stronger U.S. dollar following the release of solid U.S. economic data. The weakness spilled over into Friday’s session, even as the dollar steadied. Adding another layer of pressure, a Chinese regulatory move to ban high-frequency trading (HFT), which authorities deem speculative, appears to be weighing on the sector.
Why China’s Clampdown Is Hurting Metals
After frenzied activity in mainland China’s futures markets helped stoke global commodity prices, regulators have stepped in. Authorities have asked exchanges, including the Shanghai Futures Exchange (SHFE), to remove high-frequency traders from their data centers, Bloomberg reported, citing people familiar with the matter. High-frequency traders typically locate their servers as close to exchanges as possible to minimize latency and ensure rapid trade execution.
Base metals such as copper, zinc, and aluminum fell on the SHFE following the move, with weakness spilling over to the London Metal Exchange (LME) and dragging down global futures prices tied to these commodities.
How Metals Are Trading Early Friday
Metals are trading lower across the board, with even safe-haven gold futures slipping further from their all-time highs.
- Copper futures (HG) on COMEX were down nearly 1.5% at $5.9020 per pound, though prices remain well supported near the key $5.90 level.
- Aluminum futures (ALI) slipped about 1% to $3,115.25 per metric ton.
- Platinum futures (PL) slumped more than 3% to $2,335.50 per troy ounce.
- Palladium futures (PA) dropped over 4.5% to $1,788 per ounce.
- Gold futures (GC) edged modestly lower to $4,618 per ounce.
- Silver futures (SI) fell more than $1.40 to $91.058 per ounce.
Palladium futures, which touched a two-week high earlier in the week, have now declined for three consecutive sessions. They are on track to end the week sharply lower, down roughly 7% from Monday’s intraday peak of $1,921.30.
Source: TradingView
Trump, Fed Upset the Metals Apple Cart
President Donald Trump’s decision to defer Section 232 tariffs on critical materials—including copper—proved bearish for aluminum, copper, silver, palladium, and platinum, cutting short record-setting rallies in several of these metals.
Compounding the pressure, stronger-than-expected U.S. economic data—including a surprise decline in weekly jobless claims—and hawkish commentary from Federal Reserve officials dented hopes for additional rate cuts. The Fed, led by Chair Jerome Powell, has faced political pressure to ease policy further after delivering three quarter-point cuts since September last year. Any pause in rate reductions could bolster the dollar, a negative for dollar-denominated metals.
Is a Rebound in the Cards?
Industrial demand for metals remains robust, keeping supply-demand dynamics tight. Supply has been constrained by production disruptions and slow permitting processes. Copper, in particular, is expected to face shortages amid rising demand from copper-intensive data centers and the global transition toward green energy and electrification in transportation.
In the near term, commodities may react to the Commitment of Traders (COT) report due from the Commodity Futures Trading Commission (CFTC) at 3:30 p.m. Friday. The report provides insight into positioning and sentiment among key market participants, including commercial traders and large speculators, and often serves as a gauge for trend confirmation or potential reversals.
Looking ahead, the next major catalyst is likely the Federal Open Market Committee (FOMC) meeting on Jan. 27–28. Geopolitical developments could also spark renewed volatility across commodity markets.