Written Commentary
PRECIOUS METALS
Gold: June COMEX contracts are up nearly 3% to $4,700 following an Axios report that the US and Iran were close to an agreement on a one-page memorandum to end the war in the Gulf. President Trump also posted on social media saying the war could end if “Iran agrees to give what has been agreed to,” without providing further details. The proposed 14-point, one-page memorandum would formally end the war, followed by discussions to unblock shipping through the Strait of Hormuz, lift US sanctions on Iran and agree curbs on Iran’s nuclear program. Front-month brent crude futures have fallen nearly 7% to $102 following the report, while most risk-tied assets rally. The optimism about a final deal between the US and Iran has resulted in short-term relief in gold, with lower oil prices, moderated inflation concerns, and shifted biases with regards to Fed actions later in the year.
Market expectations for Fed policy still remain modestly on the hawkish side, though hiking expectations have fallen as a result, providing solid momentum for gold prices. Gold is likely to remain sensitive to the geopolitical landscape, which in turn frames the global inflation outlook. Any credible news regarding a reopening of the Strait is likely to pressure inflation concerns and lift gold. We maintain our expectation that the Fed will lower rates in the fourth quarter this year.
Silver: Silver futures are up 5.3% to $76.97.
BASE METALS
Copper: Copper prices extended gains on Wednesday, with LME prices hitting a two week high, on hopes that the US and Iran are close to a deal to end the war. Benchmark three-month copper on the London Metal Exchange rose 2.1% to $13,410. The most traded copper contract on the SFHE climbed 1.6% to $15,029. Chinese markets resumed trading Today after holidays.
The US COMEX contract continues to trade at a slight premium over LME copper. Arbitrage is pulling metal to the US, with the Trump administration expected to decide in July whether to impose tariffs on refined copper, insulating it from some of the global risk-off pressure weighing on the LME. COMEX inventories have climbed to successive record highs, reaching 558,692 metric tons on Monday, more than doubling over the past eight months. As for the broader copper complex, increased risk sentiment will prove supportive of prices, though sustained moves remain subject to a formal peace agreement.
Zinc: Zinc climbed 1.4% to $3,419.
Aluminum: Aluminum shed 1.3% in official activity to $3,544 on hopes of easing supply disruptions. A reopening of the Strait may see prices may briefly dip, but renewed restocking by manufacturers should limit any significant downside.
Tin: Tin jumped by 6% to $52,695.
Lead: Lead rose 0.8% to $1,987.
Nickel: Nickel was flat at $19,640.
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