USD Strength Pressures Metals

COPPER

March copper futures are steady this morning but in the overnight trade were able to trade at the highest level since early November, driven by growth in the world’s largest manufacturing sectors.  Recent gains were fueled by a recent significant drop in the U.S. dollar and easing concerns over a global trade conflict. China has chosen to implement more measured responses to the 10% tariffs imposed by the Trump administration on Chinese imports.

U.S. President Donald Trump and Chinese President Xi Jinping are set to discuss trade matters in an upcoming call, sparking optimism that tensions may ease, and tariffs could potentially be rolled back. Positive manufacturing PMI data from the U.S. and China suggested a more positive outlook on economic growth. However, treatment charges at Chinese copper smelters remained uncertain, reflecting concerns about future demand.

GOLD

After advancing to a new record high yesterday gold futures are lower today in light of a stronger U.S. dollar. Recent strength in the yellow metal can be attributed to growing speculation of lower interest rates, which enhanced the metal’s status as a safe-haven asset in light of current economic and geopolitical uncertainties. Data released on Wednesday revealed weaker-than-expected demand for services, indicating economic activity could slow in the coming months. This prompted traders to factor in the possibility of two interest rate reductions from the Federal Open Market Committee this year. The first interest rate cut from the FOMC is likely to take place at its June 18 policy meeting.

Despite lower prices for gold today, underlying support remains in light of the European Central Bank, the Bank of Canada, and today, the Bank of England lowering interest rates.

Investors are closely watching labor data this week, especially Friday’s U.S. nonfarm payrolls report, which could offer more insight into the U.S. economy’s strength and shape future Federal Reserve policy.

According to the World Gold Council, global gold demand, including OTC trading, increased 1.0% to a record 4,974.5 metric tons in 2024.

The precious metal remains supported by expectations of continued central bank buying.

SILVER

March silver futures are lower in light of a stronger U.S. dollar. The greenback firmed today after a three-day period of lower prices. U.S. dollar weakness earlier this week was linked to a reduction in fears about a global trade war potentially stoking inflation. Both the U.S. and China have adopted a more cautious stance on tariffs, with U.S. President Donald Trump and Chinese President Xi Jinping preparing to discuss trade matters and possibly agree on rolling back some of the current tariffs. This development lowers the risk of rising U.S. inflation, leading the market to maintain expectations for two Federal Reserve interest rate cuts this year.

On the supply side, the Silver Institute recently predicted a fifth consecutive year of significant silver market deficits in 2025, driven by strong industrial demand and solid retail investment, which are expected to offset weaker demand for jewelry and silverware.

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