Written Commentary
PRECIOUS METALS
Gold: August gold contracts rose 1.4% to $4,528, gaining on the back of lower oil, USD, and Treasury yields, all of which dropped after Israel and Lebanon agreed to renew their ceasefire. The renewal has raised hopes that the US and Iran can agree to a deal. For gold, Tuesday’s JOLTS data was constructive of a hold in Fed policy, leaving attention on tomorrow’s nonfarm payrolls report and any US-Iran developments. Regardless of the outcome of tomorrow’s figures, our base case for policy is a continuation of the status quo. With recent data, including weekly claims and previous hiring figures suggesting a stable labor market, tomorrow’s data will need to see a serious drop in hiring and rise in unemployment to get the market excited about rate cuts this year. That is a scenario, which we do not see as likely.
The World Gold Council released their May report, which noted that modest ETF outflows (US$2.3b from Asia and the US) weighed on returns, with COMEX managed money positioning remaining neutral. Looking ahead, the market is focused on the possibility of Fed rate hikes later this year, a dynamic we see reflected in inflation expectations. While conventional wisdom holds that hikes pressure gold via higher real yields and a stronger dollar, historical data across 44 hike events since 1997 shows gold has responded positively more than 50% of the time, particularly when markets interpreted tightening as a policy error or a signal of underlying economic fragility rather than a sign of Fed credibility. The US dollar’s trajectory remains the more critical variable for gold than the rate move itself, and with consensus leaning toward continued medium-term dollar weakness driven by fiscal concerns and a structural diversification away from US assets, the setup for gold remains constructive on a longer-term view. Key near-term risks to monitor include a potential oil-driven yield spike stemming from the Hormuz Strait standoff, softening physical demand in India and South
For gold, reduced geopolitical uncertainty will direct risk-on flows away from the dollar, while lower oil prices should ease inflation fears. The larger macro environment remains challenging as inflationary concerns remain present amid supply chain issues related to the conflict. However, gold looks to maintain support around the $4,500 level, which could present a solid buying opportunity with structural support expected to come from central bank purchasing amid lower prices.
Silver: Silver futures are up 2% to $75.23.
BASE METALS
Copper: Copper prices on the LME and COMEX rose as falling LME inventories and a rise in risk appetite supported buying conditions. Benchmark three-month copper on the London Metal Exchange was up 0.5% at $13,895, while COMEX copper edged 0.3% higher to $6.52. LME data showed orders to withdraw another 23,475 tons of copper from LME warehouses, including 18,975 tons from New Orleans. With US copper’s premium over LME above $600 a ton, arbitrage flows from LME to US warehouses remain desirable for traders. LME copper inventories fell to 379,975 tons on Wednesday, the lowest since April 2, while only 240,650 tons are available to the broader market. The Department of Commerce is due to make a recommendation to President Trump on copper tariffs by the end of the month, potentially opening the door for more shipments to the US, which would raise prices further if the tariffs do take effect. However, no policy action could see prices and premiums come under pressure.
Zinc: Zinc slid 0.8% to $3,583.
Aluminum: Aluminum dipped 1.1% to $3,662. LME warehouse stocks fell to 335,450 tons on Tuesday, the lowest level in nearly four years. The cash LME aluminum contract traded at a $116.50 per ton premium over the three-month forward, the highest level in at least 17 years, highlighting the tightness of supply in the global market. Exports of aluminum from China have slowed, which as in part exacerbated the loss of supply from the Gulf.
Tin: Tin shed 2.4% to $56,050.
Lead: Lead lost 0.3% to $2,016.
Nickel: Nickel fell 1.4% to $18,600.
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