Copper Boosted by Stronger Yuan

COPPER

Copper futures are higher, supported by demand in top consumer China and a stronger Chinese yuan, as manufacturing data from China showed that manufacturing activity expanded in June, supported by an increase in new orders that lifted production. Copper prices also found support from a weaker US dollar. Chinese demand for refined copper is expected to rise by 6% in 2025. Domestically, the abundance of copper in the US should keep markets well supplied and quell any supply worries.

The LME has imposed new restrictions on holders of large positions in nearby contracts amid low inventory levels. LME took action after premiums for nearby copper contracts jumped to their highest levels since October 2022. The restriction requires holders of long positions that are greater than the total stock levels to lend back to the market at a zero premium. In LME-registered warehouses, copper stocks at 91,250 tons have dropped 66% since the middle of February. Traders and producers rush to get copper in the US before an expected tariff is levied.

The premium for the LME’s cash copper contracts over the three-month forward hit $319 a ton last week, its highest since October 22, although it has fallen to around $120 on expectations of large copper deliveries. LME data shows 1,500 tons was delivered to its warehouses in the South Korean port of Gwangyang on Monday. More than 30,000 metric tons of copper are expected to be delivered from China to LME-registered warehouses in July, per an LME-registered warehousing firm. In warehouses monitored by the Shanghai Futures Exchange (ShFE), copper inventories at 81,550 tons have also fallen 66% since early March. CME copper stocks as of today are at 212,139 tons, a six thousand-ton increase in the past week.

GOLD

Gold futures are higher as President Trump’s tax-cut and spending bill passed the Senate and heads to the House for a final vote. The bill is expected to add around $3.3 trillion to the US debt over the next ten years, driving concerns over the US fiscal picture and sustainability of its debt, which offered support for gold as investors looked to assets with greater certainty.

Gold has found support from a weaker dollar and concerns over US tariffs and the US fiscal outlook. The dollar lowered to its weakest level since 2022, making gold more affordable for foreign investors, as the yellow metal gains more appeal with heightened trade uncertainty with the July 9 deadline approaching. President Trump expressed frustration with US-Japan trade negotiations on Monday as Treasury Secretary Scott Bessent warned that countries could be notified of sharply higher tariffs as a July 9 deadline approaches despite good-faith negotiations.

Investors will also closely watch Thursday’s labor market report for signs of a cooling labor market, which could add to expectations the Fed could cut rates sooner rather than later. Any lowering of interest rates would be supportive of gold, which benefits in a low interest-rate environment. Wednesday’s ADP nonfarm payroll report showed a -33,000 decline in private payroll figures, a stark contrast to the expected growth of 99,000.

Strong central bank purchasing of gold will remain favorable for gold’s upside; a survey by the World Gold Council (WGC) last month revealed that central banks globally anticipate an increase in gold holdings. Central banks across the globe added a net 12 tons of gold to their reserves in April, albeit at a slower rate of accumulation than in previous months. Global central banks are on pace to purchase 1,000 metric tons of gold in 2025, marking the fourth consecutive year of substantial buying. Central banks averaged a 400-500 metric ton rate of accumulation in the previous decade, marking a substantial increase in investment. Several African central banks—including those of Namibia, Rwanda, Uganda, and Madagascar—have recently announced plans to either initiate or expand their gold reserves.

SILVER

Silver futures are higher, following the moves in gold, as a weaker dollar and increasing speculation of a Fed interest rate cut offered support. The long-term outlook for silver remains positive, driven by its essential role in semiconductors, solar panels, and other clean-energy technologies, sectors that continue to attract substantial global investment. That demand has remained robust despite broad headwinds faced in the last few months as a result of tariffs. South Korea’s exports rebounded in June largely on brisk semiconductor shipments, indicating the importance of and demand for the technology, despite challenges from higher US tariffs weighing on global trade.

Recent data highlights this trend: China significantly increased its wind and solar capacity in the first quarter of 2025, while solar power generation in Europe surged 30% year-over-year during the same period. Additionally, the structural supply-demand deficit remains favorable for silver, with the market expected to remain in a deficit for the fifth straight year.

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