Metals Lower as Inflation Fears Rise

BASE METALS

Copper: Copper prices fell sharply on both the LME and COMEX as a stronger dollar prompted profit-taking by funds and traders while negative sentiment was reinforced by an absence of Chinese buyers. The SHFE weekly warehouse stock decline of only 690 tons was deeply disappointing for bulls, undermining the recent narrative of stronger Chinese demand. Benchmark three-month copper on the London Metal Exchange down 2.5% lower at $13,595, while COMEX prices fell 4.8% to $6.29. The geopolitical overhang from aggressive China/Taiwan rhetoric has also raised tail-risk concerns for Chinese copper demand broadly. Meanwhile, fears of sharply higher oil prices if US attacks on Iran materialize are further dragging on copper.

Still, supply risks persist, Chile’s Q1 2026 copper production hit a nine-year low, down 6% year-over-year to just 1.22 million tons; Chile represents 25% of global supply. Production declines were concentrated at the world’s largest mines, suggesting the Grasberg-related problems are not isolated. On the demand side, strong Indian spot demand has been reported nearly every day for two weeks, and overall improving Chinese demand expectations are also supporting prices. Meanwhile, continued worries over sulphuric acid shortages affecting copper producers also remains supportive of prices. Still, fading hopes of a peace deal in the near future between the US and Iran would otherwise create a challenging environment for copper, as elevated energy prices could dampen economic growth and demand for the metal.

Zinc: Zinc slipped 1.2% to $3,540. Zinc prices moved to their highest level in nearly four years on Thursday following an incident at Nexa Resources Cajamarquilla zinc smelter in Peru, which has heightened supply worries. The smelter is responsible for producing around 344,400 tons of zinc per year and is the largest in Latin America. Supply worries have been a theme in the market for some time, with the International Lead and Zinc Study Group previously announcing there to be a 19,000 ton deficit this year.

Aluminum: Aluminum was down 2.2% at $3,578.

Tin: Tin fell 3% to $53,000.

Lead: Lead retreated 1.3% to $1,989.

Nickel: Nickel ceded 1.8% to $18,590.

PRECIOUS METALS

Gold: June COMEX contracts are sharply lower, down 2.73% to $4,556, as the dollar surged and Treasury yields moved higher. Additionally, the market is beginning to price in expectations that the Fed will raise rates, further weighing on gold. Spiraling inflation concerns are prompting the aggressive selling rather than the classic flight-to-quality buying one would expect given the geopolitical backdrop. Gold’s net spec long has collapsed from 277,906 contracts near the all-time high down to 190,178, and with gold now trading $146 below the last COT measurement, positioning is likely near the lowest since January 2024.

Optimism that a US-Iran resolution would take place soon has waned and President Trump called Iran’s counteroffer a “piece of garbage.” Those dynamics are likely to favor higher yields and a stronger dollar, while also reinforcing the Fed’s current stance. Still, any credible news regarding a reopening of the Strait is likely to pressure inflation concerns and lift gold, though that scenario does not seem probable in the near future. Elsewhere, India raised tariffs on gold and silver to 15% from 6%, in an effort to ease pressure on its foreign exchange reserves. India is the world’s second-largest consumer of precious metals.

Silver: Silver futures are down nearly 10% to $77.23. Silver has been silver outperforming gold recently. Silver reached its highest level since March 10th, while gold has been stuck in sideways consolidation. Driving silver is the gold/silver ratio compressing to 53.96, the lowest since late January and the narrowest in modern trading history, making silver relatively cheap. HSBC raised its silver price forecast from $68.25 to $75.00 citing ongoing supply tightness.

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