Gold pares gains as trade tensions ease, Chinese copper demand reaches all-time high, and crude oil finds technical support.
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Gold
Bullish
• April saw investors purchase the most gold ETFs since March 2022 when Russia invaded Ukraine. Asian investors accounted for almost two-thirds of the inflows as gold ETF purchasing picked up steam among retail investors.
Bearish
• Gold prices fell after China-US trade talks reached a much better than expected outcome. US and China agreed to temporarily reduce tariffs on each other by 115% for 90-days. The two country’s import tax rates are now 30% and 10% respectively. In response, investors rotated away from defensive assets to more risk-on exposures as odds of a tariff-induced US recession fell dramatically overnight.
• Investors sold off US Treasuries and significantly reduced bets on Fed rate-cuts in 2025. Traders now expect just two rate cuts by the end of the year, down from expecting almost four cuts just two weeks ago. Gold has historically benefited from lower rates as it is a non-yielding asset.
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Copper
Bullish
• Chinese copper concentrate imports rose to an all-time high of 2.9 million tonnes in April, according to Chinese customs data. The figure represents an increase of 25% YoY and 22% MoM. Smelters appear to be gearing up for operations in the latter-half of the year despite current over-capacity. Shanghai Futures Exchange copper stockpiles also fell to a four-month low of 80 thousand tonnes.
• US-China tariff reprieve is helping lift copper prices as de-coupling fears are pared back. In a joint statement, both nations agreed that they “do not want a generalised decoupling”. Investors celebrated the measures which suggest a willingness to de-escalate and negotiate.
Bearish
• A research note by Bloomberg Economics suggests US-China trade will face significant headwinds, despite tariff reductions. The paper notes the remaining import taxes are still historically high and could still cut US Imports of Chinese goods by up to 70%.
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Crude Oil
Bullish
• A 90-day pause in US-China tit-for-tat tariffs helped buoy crude oil prices as economic slowdown fears were pared back. Expectations of reduced demand from the world’s two largest economies had weighed significantly on oil prices prior to the truce.
• Low oil prices are triggering a surge in demand as buyers snap up barrels on the cheap. A technical floor appears to be forming for crude oil – as prices remain resilient despite OPEC+’s announcement of output increases in June.
Bearish
• A recent Morgan Stanley report expects earnings at international oil companies to slump in 2025-26. Major investment banks are slashing oil price forecasts as OPEC+’s output increases threaten a larger-than-expected market surplus. Morgan Stanley now expects Brent prices to fall below US$60 by 2026.
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