Written Commentary
PRECIOUS METALS
Gold: August gold contracts fell 2% to $4,200, as pressure from May’s nonfarm payrolls figures, which bolstered the Fed’s position to raise rates, continues to weigh on the currency amid the lack of a peace deal. While today’s inflation data offered a strong headline surge, core inflation rose only 0.2%, below expectations of 0.3% rise and a drop from April’s 0.4%. YoY, core stands at 2.9%. The core print is relatively constructive, as it treats the headline surge as a function of energy base effects rolling forward as a continued pass-through. The readings are unlikely to shift the FOMC’s calculus significantly. While core is relatively moving in the right direction, at 2.9% YoY remains well above the 2% target. Supportive of gold today is a drop in the dollar. Gold is still trading as a pure macro asset, with an unusually tight inverse relationship to the dollar and US real yields keeping a firm lid on prices. With the inflation impulse from energy fading modestly and correlations with crude moderating, bullion’s near-term path is likely to be dictated by the trajectory of real yields and the dollar, meaning a more durable recovery probably requires either softer inflation expectations, lower yields, or a renewed bout of growth anxiety that revives safe-haven demand.
For gold, reduced geopolitical uncertainty will direct risk-on flows away from the dollar, while lower oil prices should ease inflation fears. Gold has broken support from the $4,300-$4,500 level.
Silver: Silver futures are up 0.70% to $65.68
BASE METALS
Copper: Copper prices on the LME fell to a three-week low as Middle East worries outweighed the bullish impact of reduced warehouse inventories, while COMEX copper prices rose modestly, up 0.2% to $6.33 after falling on Tuesday. While LME warehouse levels continue to fall, as traders continue to look ahead to the end of June for the Trump administration’s decision over a potential tariff on copper. COMEX prices continue to trade at a premium to LME prices, which also offers support to prices, as traders move copper from global warehouses to the US. Available stocks in LME-registered warehouses are at 225,575 tons, the lowest since February 24. Falling inventories also continue to lower the discount of the LME cash copper contract to the three-month benchmark. In China, copper inventories in warehouses monitored by the SHFE fell 3% on Friday, showing signs of solid demand despite higher prices, which Chinese traders have typically shown heightened sensitivity to. Morgan Stanley noted that 15% tariff would continue to drive both COMEX and LME prices higher, with about 2.5% of annual copper demand going toward US stockpiling.
The Department of Commerce is due to make a recommendation to President Trump on copper tariffs by the end of the month, potentially opening the door for more shipments to the US, which would raise prices further if the tariffs do take effect. However, no policy action could see prices and premiums come under pressure.
Zinc: Zinc slipped 1.6% to $3,498.
Aluminum: Aluminum shed 1.9% to $3,480.
Tin: Tin dipped 1.1% to $51,925.
Lead: Lead lost 1% to $1,965.
Nickel: Nickel slid 2.7% to $17,580.
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