Written Commentary
GOLD
Gold prices soared to new record highs on Wednesday in light of increasing concerns over the potential impact of a U.S. – China trade war on global economic growth. Although President Trump delayed tariffs on Mexico and Canada, he moved ahead with a 10% tariff on all Chinese imports this week, prompting China to retaliate with tariffs on U.S. energy products, scheduled to take effect next week. Futures came off of the overnight highs due to the bearish interest rate implications of the stronger than expected January ADP employment report, which showed an increase of 183,000 when a gain of 153,000 was expected.
While the U.S. Federal Reserve is likely to be slow to lower its key interest rate this year, other central banks are on track to more aggressively be moving to accommodation, especially the European Central Bank and the Bank of England. Financial futures markets are predicting the Federal Open Market Committee will lower its key interest rate at its June 18 policy meeting by 25 basis points.
Investors are closely watching labor data this week, especially Friday’s nonfarm payrolls report, which could offer more insight into the U.S. economy’s strength and shape future Federal Reserve policy.
According to the World Gold Council, global gold demand, including OTC trading, increased 1% to a record 4,974.5 metric tons in 2024.
The precious metal remains supported by expectations of continued central bank buying.
SILVER
March silver futures were higher in the overnight, advancing to a three-month high as global trade and economic uncertainties boosted demand for safe-haven assets like precious metals. In addition, there was some support to due to a weaker U.S. dollar. However, pressure developed later when the bearish ADP report was released.
On the supply side, the Silver Institute recently projected a fifth consecutive year of market deficits for silver in 2025, driven by strong industrial demand and increasing retail investment. These factors are expected to overshadow weaker consumption in jewelry and silverware.
COPPER
In the overnight trade March copper futures advanced to a two-week high, driven by growth in the world’s largest manufacturing sectors. This advance occurred as markets evaluated the effects of trade restrictions between China and the U.S.
According to data from the Institute for Supply Management, U.S. factory activity saw its first expansion in over two years in January, bolstering expectations for increased base metal demand. Meanwhile, a similar survey by Caixin showed growth in Chinese factory activity, alleviating concerns raised by a contractionary NBS PMI report.
Treatment charges at Chinese copper smelters remained reflective of uncertainty about near-term purchasing levels. In addition, Beijing announced plans for fiscal stimulus this year, aligning with rising credit demand driven by monetary easing, which sparked optimism for stronger demand for factory goods.
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