Written Commentary
COPPER
July copper futures are higher, trading around $4.75, close to five-day highs.
Manufacturing PMIs in China, the US, and Europe indicated a decline in factory activity, dampening the demand outlook for base metals. Meanwhile, abundant ore production from South America exacerbated the oversupply situation. The International Copper Study Group has now doubled its forecast for this year’s surplus to nearly 300,000 tons. As a result, the growing risk of a glut prompted Chinese traders to close their long positions on US copper futures, which had been mostly open following Trump’s announcement of a probe into copper import tariffs. This coincided with a sharp increase in US copper inventories as metal flowed back into the country, with factories aiming to shield themselves from potential levy risks.
GOLD
Gold futures rose Tuesday amid renewed safe-haven demand following a series of geopolitical and economic events. On the trade front, President Trump said he plans to implement pharmaceutical tariffs over the coming weeks and ruled out a meeting with Chinese President Xi Jinping this week. China’s Commerce Ministry last week said it is reviewing a US proposal to resume trade talks.
Investors are awaiting the Fed’s policy decision and speeches from several Fed officials tomorrow. Pessimistic comments about the future of the US economy from Fed officials would likely drive safe-haven demand, supporting gold prices. The central bank is expected to keep interest rates unchanged.
Friday’s Commitments of Traders Report showed that managed money net-long positions reached their lowest level in over a year.
SILVER
Silver futures are higher as safe-haven demand and a weaker dollar fueled a rally overnight.
The gold-to-silver ratio is around 102, up from 84.7 a year ago, highlighting how silver has underperformed gold over the last year. While record-high industrial fabrication and global photovoltaic production are set to support demand, slowing Chinese solar production and recession fears could contribute to potential downside risks. Half of the total demand for silver comes from the industrial sector, highlighting its unique position as both a safe-haven asset and industrial metal.
Global silver supply is set to grow steadily, with mine production expected to reach a seven-year high in 2025, reflecting increased output from Canada, Peru, the Russian Federation, and the US, alongside strong growth of supplies from silver recycling.
Investors are keeping their attention on this week’s FOMC meeting for guidance on the path for future rate cuts. The Fed is expected to leave rates unchanged. A more accommodative Fed would provide support for silver prices.
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