Written Commentary
PRECIOUS METALS
Gold: June COMEX contracts are up 1.1% to $4,747, a two-week high, reflecting optimism surrounding US-Iran talks, which have in turn lowered oil prices and near-term inflation expectations, while also tempering hawkish Fed expectations. Markets have trimmed bets on Fed rate hikes by December to around 14%, according to money market pricing. Markets are now awaiting April’s jobs report on Friday for further Fed guidance.
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. 5Y breakeven 2.58% (-9 bps d/d from 2.67%, -11 bps w/w from 2.69% on 5/01), 10Y breakeven 2.42% (-5 bps d/d from 2.47%, -6 bps w/w from 2.48%), and 5y5y forward 2.26% (-1 bp d/d from 2.27%, -1 bp w/w), the front-end breakevens have given back essentially all of last week’s run-up while the longer-horizon forward remains stable. The 5Y/10Y BE spread compressed to 16 bps (from 22 bps Tuesday), confirming the front-loaded inflation profile is fading rapidly as the energy/tariff premium unwinds. With the 5y5y forward at 2.26%, comfortably below the 2.50% de-anchoring threshold, the Fed retains full optionality to ease. Any credible news regarding a reopening of the Strait is likely to continue to pressure inflation concerns and lift gold.
Silver: Silver futures are up 4.7% to $80.43.
BASE METALS
Copper: Copper prices held steady overnight, easing tensions between the US and Iran have resulted in a weaker dollar and been supportive of prices. Benchmark three-month copper on the London Metal Exchange was little changed at $13,390. The market now appears to be pausing in anticipation of further clarity on US-Iran talks; Tehran is reportedly reviewing a new proposal that would outline a path toward reopening the Strait. Elsewhere, signs of healthy demand in China are helping to underpin prices. Copper stocks in warehouses monitored by the SHFE have more than halved to 192,025 tons since mid-March. The Yangshan copper premium, a gauge of China’s appetite for importing copper, is up more than 60% since early March.
The US COMEX contract continues to trade at a slight premium over LME copper. Arbitrage is pulling metal to the US, with the Trump administration expected to decide in July whether to impose tariffs on refined copper, insulating it from some of the global risk-off pressure weighing on the LME. COMEX inventories have climbed to successive record highs, reaching 558,692 metric tons on Monday, more than doubling over the past eight months. As for the broader copper complex, increased risk sentiment will prove supportive of prices, though sustained moved remain subject to a formal peace agreement.
Zinc: Zinc rose 0.9% to $3,431.
Aluminum: Aluminum slipped 0.4% to $3,509.
Tin: Tin was up 0.9% at $54,295.
Lead: Lead was up 0.1% at $1,980. Large holdings of lead warrants alongside a 40% holding of lead contracts maturing in May are supportive of the gains. The concentration of holdings suggests that much of the LME’s deliverable lead is tied up ahead of the May expiry, heightening the risks of a supply squeeze.
Nickel: Nickel retreated 0.8% to $19,030.
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