Stronger USD Weighs on Metals

SILVER

Silver futures fell lower, following moves in gold as a stronger dollar weighed on the metal and a risk-on sentiment took place in the markets. Silver is up 36% this year, outperforming gold’s 31% growth and coming close to the key $40-per-ounce mark. Silver’s supply-demand fundamentals also remain favorable as the market is expected to remain in a deficit for the fifth straight year. Silver’s recent rally has improved its ratio with gold to the strongest level in seven months. It currently takes 87 ounces of silver to buy an ounce of gold, compared to 105 ounces in April. Silver has found support from China in recent weeks, after the industry ministry pledged to stabilize growth in key sectors such as machinery, autos, and electrical equipment. The initiative aims to modernize production and is expected to boost demand for metals. The action plan also covers 10 major industries, including steel, nonferrous metals, petrochemicals, and construction materials.

The long-term outlook for silver remains positive, driven by its essential role in semiconductors, solar panels, and other clean-energy technologies, sectors that continue to attract substantial global investment. That demand has remained robust despite broad headwinds faced in the last few months as a result of tariffs. South Korea’s exports rebounded in June largely on brisk semiconductor shipments, indicating the importance of and demand for the technology, despite challenges from higher US tariffs weighing on global trade. Recent data highlights this trend: China significantly increased its wind and solar capacity in the first quarter of 2025, while solar power generation in Europe surged 30% year-over-year during the same period.

GOLD

Gold futures are lower, pressured by an improved risk sentiment following a trade deal between the US and EU that also led to a stronger dollar, further weighing on gold. The deal sets a 15% baseline tariff for European goods, including automobiles, while President Trump added that the EU would buy $750 billion of energy products from the US and invest an additional $600 in the US. Trump was also expected to iron out final details of the UK agreement in meetings with British Prime Minister Keir Starmer on Monday. That leaves some of the biggest outstanding deals with Mexico, Canada, and China. US and Chinese officials are set to meet in Stockholm on Monday and Tuesday, where the two sides are expected to discuss extending their trade truce beyond the current August 12 expiration date.

The Fed will meet this week and is expected to hold rates steady; markets will watch for any clues on when rates could come down. Lower interest rates will be supportive of gold. Focus also turns to the release of the advance estimate of second-quarter US gross domestic product on Wednesday; PCE inflation data, the Fed’s preferred measure, on Wednesday; and nonfarm payrolls figures for July on Friday. Any signs of a slowing labor market, a weakening economy, and a decrease in consumer confidence could add to bets for a Fed rate cut in September or October. However, this will need to be balanced against expectations that tariffs will stoke inflation. S&P Composite PMI data pointed to rising wage costs and tariffs directly contributing to steeper input price inflation, which firms passed onto customers. As a result, output price inflation increased, reaching one of the highest levels recorded of the past three years.

Strong central bank demand will continue to support gold prices. A recent World Gold Council survey showed global central banks expect to increase their gold holdings and are on track to buy 1,000 metric tons of gold in 2025, well above the previous decade’s average of 400–500 tons. Several African nations, like Namibia, Rwanda, Uganda, and Madagascar, have also announced plans to expand their gold reserves.

COPPER

Copper futures slipped ahead of talks between the US and China, where the world’s two largest economies are expected to extend the August 12 tariff deadline. Markets are also awaiting the official implementation of the 50% tariff on copper into the US, set to take effect on August 1. Some uncertainty also lingers over whether metals will be included in the recently announced US-EU trade deal, which imposes a 15% tariff on most European exports to the US. With the deadline approaching, vessels carrying copper are reportedly rushing to reach US ports before the tariff takes effect. However, analysts warn that prices could see a sharp pullback once the pre-tariff shipping surge subsides, potentially triggering a significant drop in US-bound demand. The US is expected to begin using up the stockpile of copper it built ahead of the tariff announcement before importing from abroad, which could make demand look a bit weaker for that period of inventory rundown.

Long-term gains in copper could also be limited over concerns of surpluses in the market. The global refined copper market showed a 97,000 metric ton surplus in May, compared with an 80,000 metric ton deficit in April, the International Copper Study Group (ICSG) said in its latest monthly bulletin. For the first 5 months of the year, the market was in a 272,000 metric ton surplus compared with a 273,000 metric ton surplus in the same period a year earlier, the ICSG said.

Chile’s mining minister and the chairman of Codelco, the world’s biggest copper producer, said that they have not received details on the 50% copper tariff and which copper products will be included, due to be imposed by the US on August 1.

Official data released Sunday showed China’s industrial profit declined 1.8% from a year earlier in the first half of the year, with a 4.3% drop seen in the single month of June. Industrial overcapacity has worsened deflationary pressures in the country and stoked speculation that supply-side reform could be in the works. A gathering of China’s ruling communist elites in the final stretch of July could shed light on the reform pipeline.

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