Written Commentary
BASE METALS
Copper: Copper prices are lacking direction as markets await developments regarding peace talks between the US and Iran. Benchmark three-month copper on the LME was up 0.1% at $13,288. The lack of a directional move suggests that the metals complex is waiting for clearer signals from macro and geopolitical developments. Meanwhile, data from China showed that refined copper output rose to a monthly record in March, showing no cutbacks despite last year’s vow by smelters to trim output by 10% to counter falling processing fees.
LME copper stocks remain near a 12-year high at almost 400,000 tonnes, offering headwinds to further price gains given the ample supply.
On the other hand, strong demand in China has helped limit the downside. Copper stocks in SHFE warehouses fell nearly 10% last week to 240,456 tonnes on Friday and are down almost 45% since March 13. The Yangshan copper premium, a gauge of China’s appetite for importing copper, which remains elevated, pointing to stronger demand conditions. It has gained around 270% since the end of January and is at its highest since June last year.
Zinc: Zinc rose 1.1% to $3,447. The overall speculative long position on zinc is the highest since the second quarter of 2024, as traders are likely hedging short positions.
Aluminum: Aluminum added 0.3% to $3,568. Concerns over Gulf supplies persist; primary aluminum production in the Gulf last month fell by 6% from February, preliminary data from the International Aluminum Institute showed on Monday, with a warning that the fall could be even steeper when final numbers are in.
Tin: Tin added 0.7% to $51,040.
Lead: Lead climbed 0.4% to $1,981.
Nickel: Nickel nudged up 0.2% to $18,290. Fears over sulphuric acid shortages have hit local producers, who have warned that a new ore pricing formula will increase production costs significantly. Nickel contracts on the Shanghai Futures Exchange will be opened to overseas traders for the first time from today’s evening session in China.
PRECIOUS METALS
Gold: June COMEX contracts are down 0.86% to $4,787, pressured by a stronger dollar and a small rally in the equities overnight. Renewed inflation fears after another closure of the Strait of Hormuz are also pressuring the metal ahead of peace talks between the US and Iran today. Restrained moves in the FX market and the second round of talks between the two warring countries suggest lingering optimism that a deal is still palpable. Still, markets are hesitant about a potential deal given this weekend’s developments and rhetoric, likely keeping traders in check and refining gold to a tighter range until there is further clarity on the geopolitical front. Gold is likely to trade between $4,750 and $4,850, with any move above or below dependent on developments out of the Middle East. Gold has rallied on improved risk appetite, and has sold off on periods of risk-aversion, counter to traditional dynamics, suggesting that traders are more focused on Fed implications and inflationary pressures. De-escalation is likely to prove supportive for precious metals, particularly if it weighs on the dollar.
Fed easing expectations continue to remain favorable to gold prices over the longer-term, given weakness in the labor market. Longer-run inflation expectations at the time-being are also offering resistance to higher yields as the Fed should remain biased towards policy-easing given the weakness in the labor market.
Silver: Silver futures are down 1.7% to $78.70.
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