The metals complex has remained well-supported so far this month, extending the upward momentum from late June, BMI, a Fitch Solutions company, points out.

It explains that this is underpinned by a weaker dollar, receding rate hike expectations and improved risk appetite triggered by the reportedly imminent reopening of the Strait of Hormuz, alongside mounting supply tightness concerns, with the Bloomberg Industrial Metals Index having risen by 10.6% in the year-to-date and 2.4% month-to-date up to August 12. 

The precious metals basket also received a fresh wave of impetus in early August propelling the Bloomberg Precious Metals Index to a 10.2% month-to-date gain as of August 12, recouping some of the losses incurred earlier in the year, the company explains.

Reflecting on prospects for the second half of the year, BMI expects metals to remain buoyed by supply-side tailwinds, although it notes that the demand outlook is currently a mixed picture.

While easing US-Iran escalation fears and AI-driven optimism are poised to sustain a bullish narrative, tepid Mainland Chinese demand and persistently elevated risks to the global economy could hinder the complex, limiting the scope for a sustained broad-based rally, BMI states.

COMPLEX BREAKDOWN

Copper prices in the US breached a record high on August 6, and the London Metal Exchange (LME) benchmark reached $14 370/t on the same day and hovering around record highs at $14 185/t on August 12.

Copper prices have already averaged $13 251/t in the year-to-date and with strong upside risks to BMI’s current forecast building, the company now anticipates the full-year average approaching $13 500/t.

Positive sentiment towards the global economy and a notably weaker US dollar served as the primary catalysts, with the red metal gaining 2.9% month-to-date as of August 12, while also benefiting from supply-side issues and AI-driven optimism and continued tariff-driven dislocation, BMI explains.

Elsewhere in base metals, zinc prices reached a near four-year high of $3 803/t on August 6, underpinned by tightening availability amid declining inventories, with LME zinc stocks on warrant hovering around 73 000 t to 74 000 t this month, which is a level unseen since December 2025.

Aluminium also charted gains as supply-side risks resurfaced, following Norsk Hydro’s curtailment of output to 50% of capacity at its Alunorte alumina refinery in Brazil owing to natural gas shortages.

Bucking the trend, nickel remained the sole laggard within the base metals complex month-to-date, falling by 1.8% to $16 925/t as of August 12, weighed down by renewed speculation that Indonesia could grant additional ore-production quotas, rekindling oversupply concerns, BMI explains.

Within the ferrous complex, iron-ore (62% iron content) at Qingdao port remains under considerable downward pressure, having dipped below the $90/t earlier in the month before steadying around $91.4/t as of August 11, as sluggish Mainland Chinese demand continues to disappoint, BMI avers.

The country’s official manufacturing PMI fell from 50.3 in June to 49.2 in July, with both output and new orders slipping into contraction territory.

Although the privately compiled Rating Dog gauge remained in expansionary territory at 50.9, it also eased from 51.7 in June, BMI points out.

It notes that weaker steel sector demand, soft construction activity, elevated port inventories and relatively resilient seaborne supply leave the iron ore sector vulnerable to further weakness, notwithstanding supply-side risks from disruption at Australia’s Port Hedland.

For the precious metals complex, gold prices have rallied sharply since the start of August, rising 9.3% month-to-date up August 12, hovering around $4 423/oz, which is the highest level in around two months.

The upward momentum has primarily reflected a dovish repricing of US Federal Reserve (Fed) policy expectations, as signs of easing inflation pressures, with fears over US-Iran conflict escalation having subsided and the global oil price having declined, alongside a weak US jobs report have reduced rate hike expectations.

BMI’s Country Risk team highlights that the labour market print reinforces the company’s view that the Fed will keep interest rates at 3.50% to 3.75% in the second half and the data

suggests that the labour market remains soft enough for the Fed to be unable to focus solely on the inflation side of the mandate by raising rates in the near term.

On top of this, US July CPI inflation came broadly in line with the consensus forecast, with headline inflation moderating to 3.4% from 3.5% in June, weighing on the US dollar and bond yields, supporting demand for non-yielding asset.

BMI expects gold prices to average $4 400/oz for the full-year and, with the Fed firmly on hold and the US Dollar Index anchored within the 98 to 102 range, the company believes the bulk of the previous correction is now well past.

For other commodities, BMI maintains its current forecast for Dated Brent to average $86/bbl this year, falling to $71/bbl in 2027, while noting substantial risks to the view.

For US gas prices, the company us revising down its 2026 Henry Hub forecast from $3.9/mnBTU to $3.3/mnBTU, reflecting stronger-than-expected production and above-average storage inventories over the first half.

It expects Henry Hub to average $2.9/mnBTU in the third quarter before rising to $3.7/mnBTU in fourth quarter, as LNG feedgas demand recovers from maintenance and heating demand increases, although comfortable inventories will limit the scale of the rebound.