Written Commentary
BASE METALS
Copper: Copper prices were mixed overnight. Benchmark three-month copper on the London Metal Exchange eased 0.3% to $13,360, while COMEX copper prices are up 0.17% at $6.24. Copper has been trading in a narrow range as the market is still awaiting a possible decision from Washington over tariffs on refined copper as outflows from LME warehouses to the US continue. The Trump administration had originally set a June 30 deadline to announce potential tariffs on the metal. Still, tariff risk is still present and should not be discounted. US copper stocks sit at 606,626 tons have climbed nearly 600% since the initial launch of the investigation. Much of that stock has come from LME warehouses. In China, the Yangshan copper premium, rose 8% to $80 a ton, to mark a 13-month high.
Zinc: Zinc fell 0.9% to $3,560.
Aluminum: Aluminum gained 0.4% to $3,126. Traders are weighing potential supply tightness as Middle East Tensions continue on alongside outflows from warehouses. Two tankers were hit in the Strait and Iran said there would be no more peace talks unless President Trump stopped threats to restart the war.
Tin: Tin added 0.4% to $53,300.
Lead: Lead rose 0.6% to $1,890.
Nickel: Nickel lost 0.5% to $16,340.
PRECIOUS METALS
Gold: August gold contracts are marginally higher, trading around $4,170 as investors largely await tomorrow’s FOMC meeting minutes. The geopolitical bid also stayed in focus as President Trump renewed threats of military action against Iran, while Iran’s foreign minister said negotiations on a final peace deal will not continue unless Washington abandons its threats. The relatively soft June jobs report and fall in oil prices toward pre-conflict levels have taken some momentum out of rate-hike expectations. Still, the labor market has proven robust and Fed rate hike expectations are more likely to be shaped by inflation signals than labor market data. With no immediate signs of a downturn in the labor market, the Fed should still have the edge to focus on inflation.
Recent dynamics continue to show that gold is moderately correlated (negatively) with moves in the dollar and the 10-year TIPS yield. The failure for gold to hold recent gains highlights the current sentiment that macro factors are determining price direction. Markets are pricing around 30 bps of total tightening. We slightly favor a Fed rate hike in Q4, over a hold. However the outlook remains dependent upon inflation data rather than labor data in our view.
Silver: July Silver is down 1.5% to $60.99.
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