Written Commentary
PRECIOUS METALS
Gold: August gold contracts moved 0.18% lower to $4,355, still under pressure from May’s nonfarm payrolls figures, which bolstered the Fed’s position to raise rates. Supportive of gold today is a drop in the dollar, a rally in global equity markets and yesterday’s announcement from Iran and Israel that they have ceased strikes against each other. From the macro perspective, the Fed remains well positioned to combat the surge in inflation, having more room to hike rates if necessary, which underscores the challenging environment it remains in as inflationary concerns remain present amid supply chain issues related to the conflict.
The overhang from Friday’s payroll report is likely to lead to a consolidation in the metal ahead of tomorrow’s inflation data, which offers a downside risk in the event inflation continues to surge, with particular focus on the core reading. In that event, Fed rate hike expectations would increase, further pressuring gold. The upside for gold would be a well-contained core reading and only a modest increase in headline inflation.
For gold, reduced geopolitical uncertainty will direct risk-on flows away from the dollar, while lower oil prices should ease inflation fears. Gold has broken support from the $4,500 level, which could present a solid buying opportunity with structural support expected to come from central bank purchasing amid lower prices.
Silver: Silver futures are down 0.40% to 68.28
BASE METALS
Copper: Copper prices on the LME and COMEX rose on a weaker dollar, while LME warehouse levels continued to fall, as traders continue to look ahead to the end of June for the Trump administration’s decision over a potential tariff on copper. Benchmark three-month copper on the London Metal Exchange 0.9% to $13,740; COMEX copper rose 1.3% to $6.43. COMEX prices continue to trade at a premium to LME prices, which also offers support to prices, as traders move copper from global warehouses to the US. Available stocks in LME-registered warehouses are at 228,650 tons, the lowest since February 24. Falling inventories also continue to lower the discount of the LME cash copper contract to the three-month benchmark. In China, copper inventories in warehouses monitored by the SHFE fell 3% on Friday, showing signs of solid demand despite higher prices, which Chinese traders have typically shown heightened sensitivity to. Morgan Stanley noted that 15% tariff would continue to drive both COMEX and LME prices higher, with about 2.5% of annual copper demand going toward US stockpiling.
The Department of Commerce is due to make a recommendation to President Trump on copper tariffs by the end of the month, potentially opening the door for more shipments to the US, which would raise prices further if the tariffs do take effect. However, no policy action could see prices and premiums come under pressure.
Zinc: Zinc rose 1.4% to $3,586.
Aluminum: Aluminum fell 0.5% to $3,585.
Tin: Tin rose 1.9% to $53,250.
Lead: Lead added 0.2% to reach $1,993.
Nickel: Nickel was down 1.2% at $18,130.
Interested in more futures markets? Explore our Market Dashboards here.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2021 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
