Written Commentary
PRECIOUS METALS
Gold: August gold moved lower despite a drop in the dollar while oil prices rose. Recent strikes in the Gulf have reinforced expectations that the Fed will be moving higher on rates this year. However, Iran and the US agreed to halt the strikes and renew talks regarding disputes over the Strait. Largely, gold prices are remaining under pressure as traders remain uncertain over the outlook of progress in US-Iran talks, while the recent flare up in strikes has renewed the risks that energy prices could rise again. Investors await June’s nonfarm payrolls data, for further clues the Fed outlook. A stronger-than-expected nonfarm payrolls reading is likely to reinforce expectations of a more hawkish Fed, which could risk a break below $4,000 for gold.
Money markets have been broadly unchanged in the expectations for monetary policy since last week, pricing around 32 bps of total tightening and remaining favorable to a hike in October. For gold, the recent hawkish repricing in Fed policy expectations and a stronger dollar have significantly weighed on the metal. 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.
Silver: July Silver is down 1.7% to $58.23.
BASE METALS
Copper: Copper prices slipoped, with benchmark three-month copper on the London Metal Exchange down 0.2% to $13,335 and COMEX copper prices 1% lower to $6.09. A stronger dollar and hawkish-repricing in Fed policy expectations are the main pressures for metals and weigh on sentiment for traders. 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.
SHFE copper stocks fell 5.7% from last week to 135,732 tons, the lowest since December, while LME copper stocks moved down to 336,475 tons, the lowest since March 18. The cash LME contract was trading at a $35.50 per ton discount to the three-month forward, narrowing from a $42.40 discount on Thursday.
Zinc: Zinc slipped 0.2% to $3,466.
Aluminum: Aluminum was down 0.5% at $3,163. Aluminum prices as fears eased that strikes between the US and Iran would escalate and disrupt Middle East shipments.
Tin: Tin climbed 0.3% to $50,720.
Lead: Lead gained 0.2% to $1,907.
Nickel: Nickel lost 0.3% to $16,635.
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