Written Commentary
COPPER
July copper futures steadied around $4.65 following a volatile Monday as investors reassessed broader economic conditions following the trade agreement breakthrough between the US and China.
While the trade agreement offers support for the metal, oversupply concerns remain. Expectations of copper surpluses are worrying investors, as a Reuters survey details an expected copper market surplus of more than 60,000 tons, while The International Copper Study Group forecasts surpluses to reach 289,000 tons in 2025. Abundant ore production from South America exacerbated the oversupply situation; global mine production is expected to increase by 2.3% in 2025. As a result, the growing risk of a glut prompted traders to close their long positions on US copper futures. This coincided with an increase in US copper inventories, weighed on prices Monday.
GOLD
June gold futures edged higher in overnight trade after falling sharply on Monday. Increased risk appetite returned to the market after the US and China announced a temporary reduction in tariffs while they continue to negotiate a long-term trade deal. The news also brought strength to the dollar, which was up almost 1.25%, hitting over a one-month high, further weighing on the metal.
The temporary deal with China sees tariffs on Chinese goods fall from 145% to 30%, while China cuts their tariffs on the US to 10% from 125%. The reductions will last for 90 days while negotiations continue. China has also agreed to suspend or cancel retaliatory, nontariff measures that could include export restrictions on critical minerals.
The US CPI inflation data for the month of April came in weaker than expected, with a core CPI reading of 0.2% month-over-month, where economists expected an increase of 0.3%. The readings are not a total surprise, as the effects of tariffs on prices will most likely not have affected prices in April, as companies rushed to get imports in before the duties were set. May and June will likely be where inflation pressures from tariffs become more evident in the economy. Markets are currently anticipating two 25 basis-point cuts this year, with the first cut coming in September.
Continued central bank purchasing and gold-backed ETFs remain supportive of the metal. Gold-backed ETFs saw inflows of over 115 tons of gold globally in April, the largest inflow since March 2022.
SILVER
July silver futures rose in overnight trading, recovering some of Monday’s losses. This movement followed gold’s direction as safe-haven demand decreased due to increased risk appetite driven by positive trade developments.
The agreement bolstered the long-term prospects for silver’s industrial demand, especially in the renewable energy sector, where both the US and China are key players. Silver is a key ingredient in semiconductors, solar panels, and other clean-energy technologies, which are all sectors that would greatly benefit from a continued drawdown in tariffs between the two countries that would support industrial production. Half of the total demand for silver comes from the industrial sector.
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