Written Commentary
COPPER
May copper futures are higher and are coming up against a major downtrend line as traders assess the possibility of President Donald Trump following through on his tariff threats against the metal. Last week, President Trump instructed the government to explore imposing tariffs on copper imports to boost domestic production. This move is seen as part of his broader effort to counter China’s influence in the global copper market, as copper plays a significant role in the production of electric vehicles, military equipment, and a variety of consumer goods. In addition, President Trump’s proposed 25% tariffs on Mexico and Canada are set to take effect on March 4, along with a 10% tariff on Chinese imports. These developments increase the risk of a global trade war, potentially weakening demand.
In the longer term, analysts expect copper prices will increase due to strong demand for electrification, while supply growth is likely to be limited by years of underinvestment in mining capacity. However, copper supply in China remains plentiful, with stocks increasing to over 260,000 tonnes, which is three times the amount at the beginning of the year, while bonded stocks have doubled to 33,000 tonnes.
SILVER
April silver futures are substantially higher, fueled by a weaker U.S. dollar and safe-haven buying in light of concerns about shifting U.S. trade policies. Last week, President Donald Trump announced that tariffs on Canadian and Mexican imports would take effect on Tuesday, along with an additional 10% duty on Chinese imports, raising the total tariff on China to 20%. In response, reports suggested that Beijing was preparing retaliatory measures against US imports.
At the same time, ongoing supply and demand uncertainties continued to impact market sentiment. Demand showed signs of weakness, with U.S. silver coin purchases dropping 27% year-over-year in January to 3.5 million ounces, marking the lowest January demand since 2018.
Weaker U.S. economic data boosted expectations for further interest rate cuts from the Federal Reserve, providing some support to precious metals.
GOLD
April gold futures are higher on Monday as concerns over U.S. President Donald Trump’s tariff policies sparked a move into safe-haven assets. President Trump’s proposed tariffs on Mexican and Canadian goods, scheduled to take effect on March 4, along with an additional 10% duty on Chinese imports, raised fears of retaliatory measures and escalating trade tensions.
Some of today’s strength can be linked to weakness in the U.S. dollar, making gold more affordable for holders of other currencies. As worries about the U.S. economy’s health resurfaced, market expectations for Federal Reserve interest rate cuts increased, further enhancing the appeal of gold as a non-yielding asset.
The 9:00 February Institute for Supply Management manufacturing index is anticipated to be 50.5, and the 9:00 January construction spending report is estimated to be unchanged.
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