Written Commentary
BASE METALS
Copper: Copper prices moved higher overnight and into the morning on a raft of supportive data. China’s exports surged in June, buoyed by orders for computer chips. Exports climbed 27% YoY, to mark the best reading in four months, and beating consensus forecasts. The stronger-than-expected trade performance looks set to keep China on track to post a trade surplus topping $1 trillion. Imports grew 36%, compared with a 27.4% gain the month before, to mark a five-year high. Continued export strength, largely driven by AI-related demand, points to a stronger second half. The outlook for China should also benefit from a more expansionary policy mix, including accelerated fiscal spending and modest monetary easing, while a de-escalation in the Middle East would support China through lower oil prices. Benchmark three-month copper on the London Metal Exchange climbed 0.4% to $13,590, while COMEX copper prices are up 2.2% at $6.42. In China, the premium paid over SHFE prices to spot prices rose to 215 yuan, up from 0 and the end of June.
Zinc: Zinc rose 0.5% to $3,585. Recent disruptions have reinforced supply worries. Glencore’s smelter in Kazakhstan is operating at reduced capacity following an explosion, Nexa’s smelter in Peru is slowly restarting operations. Meanwhile, a seismic event at Boliden’s Garpenberg mine earlier this year has also raised the possibility of prolonged lower output.
Aluminum: Aluminum dipped 0.1% to $3,167. Emirates Global Aluminum said it had restarted its alumina refinery in the UAE, signaling that broader metal production in the Gulf is set to start again, although the outlook remains cloudy amid the renewed fighting.
Tin: Tin jumped 3% to $54,195.
Lead: Lead fell 0.7% to $1,855. LME inventories rose by 80,700 tons to their highest level in 14 years after inflows at Singapore warehouses.
Nickel: Nickel slipped 0.1% to $16,750.
PRECIOUS METALS
Gold: August gold contracts moved sharply higher in response to June’s inflation data, which on the surface is bullish for the metal. On a headline basis the June print is supportive, but the disinflation story is still incomplete. Headline at 3.5% YoY is meaningfully above the Fed’s 2% target, core at 2.6% is trending in the right direction but driven in part by volatile goods deflation, and the two most persistent components, shelter and supercore services, remain entrenched above 3%. New Fed Chair Kevin Warsh has explicitly signaled concern about the multi-year overshoot of the 2% target, meaning a single soft month is unlikely to shift the policy calculus materially. Still, the reading has pushed out rate hike expectations to later in the year, bullish for gold. Markets are priced for a move higher in December and see nearly 33 bps of tightening by year-end. Renewed fighting in the Gulf amplifies inflation worries and raises the risk of further Fed tightening, adding to headwinds. The scale of the increase in fighting an rise in oil prices will be a dominant driver for gold. Those dynamics are likely to continue to play an outsized role in Fed policy expectations.
Silver: September contracts are up 2.6% to $59.48.
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