Written Commentary
SILVER
Silver futures are lower after finishing Tuesday with solid gains, as the white metal has quietly outperformed gold in recent days. July silver futures are trading above $32.7.
Long-term prospects for silver’s industrial demand remain supportive due to expected expansions in the renewable energy and tech sectors, where the US and China are both key players. Silver is a key ingredient in semiconductors, solar panels, and other clean-energy technologies, which are all sectors that would greatly benefit from a continued drawdown in tariffs between the two countries that would support industrial production. Half of the total demand for silver comes from the industrial sector.
COPPER
July Copper futures were lower in overnight trade after rising above the $4.70 mark Tuesday as investors continued to assess the implications of the US-China trade agreement. Despite the temporary reduction in tariffs, the level of tariffs that is currently in place are still significant and could impact raw material consumption.
While the trade agreement offers support for the metal, oversupply concerns remain. Expectations of copper surpluses are worrying investors; a Reuters survey details an expected copper market surplus of more than 60,000 tons, while The International Copper Study Group forecasts surpluses to reach 289,000 tons in 2025. Abundant ore production from South America exacerbated the oversupply situation; global mine production is expected to increase by 2.3% in 2025.
Copper stocks in COMEX-owned warehouses have risen to their highest levels since 2018, as a pending probe in Washington could result in new copper tariffs. The pending investigation has resulted in a mass of copper flows to the US from around the world, drawing down foreign stocks and creating a tight supply elsewhere. Copper stocks at the Shanghai Futures Exchange have dropped 70% since the end of February.
GOLD
Gold futures fell in overnight trade, giving up Tuesday’s gains as easing trade tensions between the US and China and a rally in the equities market weighed on safe-haven demand.
Gold found support Tuesday from a weaker-than-expected inflation reading in the US, as inflation eased to its lowest level since February 2021 at 2.3%. While the mild reading would add to expectations of a near-term rate cut for the Fed, the uncertainty surrounding tariffs’ inflationary effects has likely not changed the Fed’s views on pausing rate cuts. A reduction in rates would be supportive of gold, which benefits from a lower interest rate environment.
Continued central bank purchasing and gold-backed ETFs remain supportive of the metal. Gold-backed ETFs saw inflows of over 115 tons of gold globally in April, the largest inflow since March 2022.
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