Written Commentary
PRECIOUS METALS
Gold: June COMEX contracts are up 0.26% to $4,742, parring earlier losses, which stemmed from inflation concerns after President Trump rejecting Iran’s response to a US proposal to end the conflict. Recent optimism that a US-Iran resolution would take place soon has seen inflation expectations fall, leading to a reduction in hawkish Fed expectations, a dynamic which has been supportive to gold. However, markets have temporarily unwound that narrative as uncertainty over the conflict and a reopening of the Strait lingers. The next catalyst for gold will be tomorrow’s inflation data, which is expected to show that CPI ran 0.6% higher in April and land at 3.7% YoY. Friday’s labor report showed the economy added 115,000 jobs, exceeding the consensus forecast of 62,000-67,000 and showing continued modest labor market expansion. The unemployment rate remained unchanged at 4.3% with 7.4 million unemployed. February’s payroll change was revised down by 23,000 (from -133,000 to -156,000), while March was revised up by 7,000 (from +178,000 to +185,000), resulting in a net downward revision of 16,000 jobs between the two-months. Market expectations for Fed policy are little changed following the Jobs figures. Markets are pricing a December hike at 19%, up from Friday’s 11%.
Gold is likely to remain sensitive to the geopolitical landscape, which in turn frames the global inflation outlook. The TIPS market has shown a meaningful break in the rising trend regarding inflation compensation, consistent with falling oil and the US–Iran de-escalation story. The 5y5y forward is near 2.28%, comfortably below the 2.50% de-anchoring threshold, giving the Fed full optionality to ease later in the year. Any credible news regarding a reopening of the Strait is likely to continue to pressure inflation concerns and lift gold. We maintain our expectation that the Fed will lower rates in the fourth quarter this year.
Silver: Silver futures are up 6.4% to $86.00.
BASE METALS
Copper: Copper prices on the LME climbed to a three-month high as supply worries outweigh demand concerns over the impact of the US-Iran conflict. Benchmark three-month copper on the London Metal Exchange gained 1.1% to $13,715. Freeports’ Grasberg mine in Indonesia is facing delays in returning to production, Bloomberg News reported that miner is targeting a return to full production at Grasberg by early 2028 after initially expecting the mine to return to full production capacity by the end of 2027. As copper demand faces scrutiny over the economic impact of higher energy prices, supply worries look set to challenge downside risks to prices. Meanwhile, in China, coppers prices on the SHFE were up 0.9% to $15,396. PPI inflation data came in above forecasts, raising optimism that government efforts to stimulate the economy were having an impact.
US copper futures continue to outperform global prices; COMEX copper futures are up 2.7% to $6.47. Speculation of further tariffs on US copper later in the year have supported arbitrage and defensive purchasing to the US. The Trump administration expected to decide in July whether to impose tariffs on refined copper. This has also partly insulated it from some global risk-off pressures in recent weeks. COMEX inventories have climbed to successive record highs, reaching over 558,000 metric tons, more than doubling over the past eight months. As for the broader copper complex, increased risk sentiment will prove supportive of prices, while a formal peace agreement is likely to see investors adopt pre-war themes.
Zinc: Zinc added 0.7% to $3,454.
Aluminum: Aluminum gained 1.9% to $3,570.
Tin: Tin advanced 1.6% to $54,750.
Lead: Lead edged up 0.1% to $1,976.
Nickel: Nickel climbed 1.4% to $19,160.
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