Written Commentary
BASE METALS
Copper: Copper prices rose as Chinese buying and concerns over disruption to sulphuric acid and diesel supplies supported prices. Benchmark three-month copper on the LME was up 0.3% at $13,072. Shortages of sulphuric acid, which is used to make around 20% of the world’s copper, persist due to the ongoing conflict in the Middle East. China recently banned acid exports, affecting copper miners in Chile, the world’s biggest mined copper producer.
Focus this week is likely to center around PMI data out of China tonight as surveys elsewhere have begun to show strains from supply-chain disruptions rising price pressures caused by the US-Iran conflict. Forecasts expect to see a pullback in the official manufacturing gauge as rising price pressures are likely to negatively impact the headline reading. Business confidence will likely have been weighed down by the war, though improving industrial indicators, including higher utilization rates in cement and steel, should lend support to the manufacturing data. Flash PMIs from elsewhere in Asia showed an uptick in manufacturing in April, but at least part of that was driven by stockpiling due to fears about war-driven supply shortages, and business confidence is dimming as supply chains come under stress.
Zinc: Zinc fell 1.1% to $3,322.
Aluminum: Aluminum rose 0.5% to $3,555.
Tin: Tin gained 1.7% to $49,775.
Lead: Lead was flat at $1,957.
Nickel: Nickel was flat at $19,450. French miner Eramet said it was planning to halt production at its Weda Bay nickel mine in Indonesia next month. Additionally, fears over sulphuric acid shortages have hit local producers in the country, who have warned that a new ore pricing formula will increase production costs significantly.
PRECIOUS METALS
Gold: June COMEX contracts fell 1.2% to $4,553 as a stronger dollar and oil prices continued to weigh on the metal and dampen the rate-cut outlook for the Fed. Fed funds futures have reduced their odds of a July 2027 cut, which was the closest-priced policy action, to 20% from 44% on Monday. Price direction in gold continues to take its cues from the oil market, keeping the risk of near-term dollar strength and elevated inflation in focus. Brent crude above $100, stalled peace talks, and US-Iranian restrictions on the Strait of Hormuz are likely to prevent a breakout higher. Persistent uncertainty around the Strait of Hormuz has kept risk sentiment fragile and maintained the dollar’s safe-haven appeal.
Today’s action will center around Fed Chair Powell’s tone and any tweak from “solid” to “moderate” growth language. Another question is whether Powell is going to hold the governor seat until 2028, or whether he chooses to resign after the expiry of the Chair term. The historical norm is for Chair to step down after their term is over. Now that the investigation into Powell has been dropped, that path for him to do so is much more open. If Powell indicates that he will leave the board after the expiry of his term, that could trigger an upside move in gold. For now, higher energy prices are likely to reinforce inflationary fears and weigh on upside potential, absent any changes in the US-Iran conflict.
Silver: Silver futures are 2.8% lower at $72.88.
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