Written Commentary
BASE METALS
Copper: Copper prices rose as traders bought the recent dip and as this morning’s PCE data softened the dollar, making the metal more affordable for foreign purchasers. Benchmark three-month copper on the London Metal Exchange gained 1.1% to $13,230; COMEX copper prices rose 1.9% to $6.06. Like gold, a stronger dollar and hawkish-repricing in Fed policy expectations have pressured to the metal in recent sessions, though yesterday’s strong AI earnings lifted sentiment and saw traders buy the recent dip in prices. Still, fundamentals for copper remain unchanged with lower LME inventory, shipments to the US, and broad-demand for AI infrastructure and energy transition expected to underpin demand. However, the macro environment for metals remains challenging, as US rate expectations continue to have a downward effect on prices. Oil prices will need to drop substantially and evidence of transitory inflation are likely needed to reduce rate hike expectations to reduce inflation expectations.
The global refined copper market showed a 145,000 metric ton deficit in April, compared with a 23,000 ton surplus in March, the International Copper Study Group (ICSG) reported. For the first 4 months of the year, copper was in a 239,000 ton surplus compared to a 47,000 ton surplus in the same period a year earlier. World refined copper output in April was 2.42 million tons, while consumption was 2.57 million tons. When adjusted for changes in inventory in Chinese warehouses, there was a 156,000 ton deficit in April compared with a 15,000 ton surplus in March.
Zinc: Zinc added 0.1% to $3,424.
Aluminum: Aluminum rose 0.7% in official activity to $3,144. The US granted Iran a 60-day sanctions waiver, which has improved prospects of aluminum shipments through the Strait of Hormuz, easing supply worries. Rising shipments from the Middle East are expected to offer further pressure on prices, as the Middle East houses 9% of global smelting capacity. Still, damage to production facilities is likely to temper the amount of production in the coming weeks.
Tin: Tin advanced 1.2% to $50,250.
Lead: Lead rose 0.3% to $1,919.
Nickel: Nickel dipped 0.1% to $16,810. Indonesia’s mining ministry said it has not yet decided its nickel production quota for 2026 amid speculation the cap would be increased.
PRECIOUS METALS
Gold: August gold moved higher in response to this morning’s PCE data, which showed the Fed’s preferred inflation gauge rise 0.4% MoM in line with consensus forecasts. YoY, the reading rose to 4.1%, core PCE rose 0.3% MoM and 3.4% YoY, reinforcing the Fed’s higher-for-longer stance although the lack of an upside surprise was friendly to prices in bonds, equites, and the metals. Broadly for gold, the recent hawkish repricing in Fed policy expectations and a stronger dollar (DXY at a one-year high) have significantly weighed on the metal, with August contracts breaking below the $4,000 level repeatedly.
Recent dynamics continue to show that gold is moderately correlated (negatively) with moves in the dollar and the 10-year TIPS yield; the dollar’s strength following the FOMC meeting being the main catalyst for the move lower in gold. Money markets are now favorable to a rate hike come September and are fully priced in for a hike by the following meeting in October. We maintain our outlook that if tanker traffic in the Strait remains closed or does not fully reopen by the end of June, we expect to see the Fed raise rates in Q3. Otherwise, we expect the Fed to hold on rates.
0Gold has seemingly found support at the $4,000 level. Meanwhile, Deutsche Bank revised their base case for gold lower to $4,800, more consistent with a Fed hold. If the Fed does go through and raise rates, gold may stay consolidated closer to the $4,2000 level. Warsh’s post-FOMC statement explicitly attributed elevated inflation to “supply shocks that have driven price increases in certain sectors, including energy”. However, with Brent and WTI both continuing a decline that began when the deal was first announced, it directly undermines the primary inflation driver Warsh cited, which in turn could reduce the probability of the hikes and offer support for gold. Gold’s near-term path is likely to be dictated by the trajectory of 10-year TIPS yields and the dollar, meaning a more durable recovery probably requires either softer inflation expectations.
Silver: July Silver is up 0.3% to $58.27
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