Written Commentary
PRECIOUS METALS
Gold: August gold contracts moved higher, trading near the psychological $4,000 level as the dollar maintained its recent strength while US-Iran strikes reinforced a hawkish inflation backdrop. The upside in gold today is coming from new reports of mediation efforts to stop the fighting between the US and Iran. Still, oil prices moved. A senior Iranian official told Reuters that Tehran had received a proposal for a 10-day ceasefire. Meanwhile, Yemen’s Iran-aligned Houthis threatened to impose a naval blockade on Saudi Arabia. Ongoing tensions in the Middle East continue to stoke inflation worries despite a pullback in near-term Fed tightening expectations last week and a drop in inflation swaps. Inflation expectations have steadily eased this month even as oil prices remained elevated, with one-year inflation swaps falling below the Fed’s 2% target for the first time since October 2024. The Fed’s renewed credibility in fighting inflation, dwindling tariff effects, and a stable labor market are among several factors contributing to the low expectation. A Reuters poll showed that economists are expecting the Fed to keep rates on hold for the remainder of the year, while a majority of those who answered a separate question about the chance of a rate hike this year now described the likelihood as “high”, a reversal from last month when most saw it as “low.” Markets are pricing in a October rate hike and see 39 bps of tightening before year end.
Silver: September contracts are up 3% to $58.86.
BASE METALS
Copper: Copper prices moved to one-month highs, supported by firm demand in China and declining inventories outside the US. Benchmark three-month copper on the LME gained 1.6% to $13,835; COMEX copper is up 2.7% to $6.51. In China, copper warehouse stocks are declining, import premiums have risen substantially, and physical demand has been resilient. Copper stocks in SHFE-monitored warehouses have declined by 82% since May; copper in LME-registered warehouses are down by 28% in the same period, with much of the LME material moving to the US. The premium paid over SHFE prices to buy copper in the spot market is up to 435 yuan a ton from zero last week and the highest since May of 2025. Tariff anxiety is helping to fuel the recent advance in prices, while concerns over sulphuric acid availability have reinforced supply worries outside of tariff dynamics.
Zinc: Zinc advanced 1.3% to $3,565.
Aluminum: Aluminum gained 1% to $3,170. President Trump on Monday signed a proclamation to adjust tariffs on imports of aluminum into the US.
Tin: Tin climbed 2.1% to $54,000.
Lead: Lead added 0.5% to $1,888.
Nickel: Nickel was up 1.3% at $17,150.
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