Head of Commodity Strategy
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Key points:
In our latest update, we flagged the growing two-way risk to gold, silver, and platinum, each facing stiff resistance levels that threatened to trigger a period of prolonged sideways consolidation. Yet, just days into June, the market narrative swiftly changed: gold and, more notably, silver pierced through key technical barriers, while platinum paused to consolidate after a sharp rally in May. The immediate catalyst was a broadening decline in the US dollar, with the Bloomberg Dollar Spot Index now trading near a two-year low. However, beneath the surface, resurgent geopolitical risks and renewed trade war anxieties are also feeding into the bullish momentum across the precious metals complex.
Looking beyond the technicals, macroeconomic currents are shifting. For decades, large global current account surpluses—mirrored by persistent US deficits—have found their way into US assets, helping to sustain dollar strength. That dynamic, however, is now in question. Protectionist trade policies and rising political polarization, once viewed as transitory, are increasingly seen as structural risks, prompting sovereign wealth funds and institutional investors to rebalance away from overexposure to US equities and Treasuries.
This reallocation has already played a visible role in lifting gold prices, as investors seek insulation from mounting concerns around US fiscal sustainability. The US Treasury faces a formidable refinancing wall, with roughly $9.2 trillion in Treasury securities maturing in 2025—equivalent to nearly 30% of US GDP and a full third of outstanding marketable debt. Layer on top the CBO’s projected $1.9 trillion deficit for FY 2025, and the stage is set for an aggressive funding schedule in a potentially less hospitable bond market.
In a recent CBS interview, Treasury Secretary Scott Bessent sought to allay fears, insisting that “we are on the warning track and will never hit the wall” with respect to default risk. Nevertheless, the bond market remains nervous, with talk of a “fiscal debt black hole” echoing through corners of the macro community. The implication: unless growth and revenue surprise to the upside, the only viable escape route may be renewed quantitative easing—potentially inflationary and ultimately supportive of hard assets like gold.
Technically, gold has now broken above the downtrend from its April 22 record high at $3,500, with that former resistance line now turning into support near $3,325. Additional layers of support are seen at $3,280 and the 55-day moving average at $3,223. While we remain cautious about declaring an imminent charge to fresh all-time highs, the macro setup is shifting in favour of precious metals. A potent mix of post-stimulus fiscal drag, tariff-induced supply shocks, waning consumer confidence, a weakening labour market, and deteriorating real spending power may soon warrant a dovish and potentially stronger-than-expected policy pivot from the Federal Reserve, potentially then sending bullion prices higher towards USD 4,000.
Silver surged on Monday, posting its strongest one-day rally since last October, climbing 5.4% to pierce the key resistance-turned-support level at USD 33.68. The move was underpinned by a broad-based rally in commodities—most notably gold and copper—as well as renewed weakness in the US dollar, which continues to trade near multi-year lows on a trade-weighted basis.
While the rally briefly stalled just shy of the October 2023 high at USD 34.90—a 12-year peak—some modest profit-taking emerged. Importantly, the pullback has yet to challenge the newly established support at USD 33.68, preserving the potential for additional near-term upside.
From a broader perspective, silver’s dual role as both a monetary and industrial metal makes its performance tightly linked not only to gold and dollar movements, but also to industrial demand signals, particularly from copper. As such, continued strength in copper prices—fueled by resilient Chinese demand, tight inventories outside the U.S., and green energy transitions—could help sustain the rally in silver.
Another key dynamic to monitor is silver’s relative strength against gold, with the XAU/XAG ratio showing early signs of a breakdown below 98 after recently hitting a high above 105. Note, the ratio’s five-year average is much lower at around 82, and while we do not envisage a return to that level, given the relative stronger pull in gold from central banks, a softening back towards the upper end of the 2023 to 2024 trading range around 91.5 cannot be ruled out, and would at an unchanged gold price signal a silver move above USD 36.
Technically, the setup remains constructive provide support can be maintained around USD 33.68 which now acts as the immediate downside line in the sand. A decisive break above the October high at USD 34.90, followed by USD 35.20 - the 61.8% Fibonacci retracement of silver’s steep decline from its 2011 high near USD 50 to the 2020 low at USD 11.64, would signal fresh momentum.
The New York HG copper market continues to trade within a relatively wide range, with some price action driven by market participants attempting to pre-empt what tariff level—if any—the US Commerce Department will eventually recommend the Trump administration apply on US imports. The tariff issue drew additional attention over the weekend after the US administration doubled existing tariffs on US steel and aluminium imports to 50%. Trump has threatened to impose a 25% duty on all copper imports—a move that could roil the global market for one of the world’s most important metals—not least considering a robust demand outlook, recently further supported by the energy transition, which is expected to increase demand for copper, a key conductor, in electric vehicles, AI-related data centres, and cooling, as parts of the world continue to warm.
The tariffs, aimed at protecting domestic producers and boosting US production and refining capacity, would, however, leave US manufacturers paying significantly more for their metal than overseas rivals. Meanwhile, US miners would benefit from higher selling prices, as evidenced by the recent strong performance among steel and aluminium producers. The copper probe, launched in February under Section 232 of the Trade Expansion Act, is expected to conclude within weeks, and the resulting announcement is likely to trigger a major price adjustment—particularly in the spread between London and New York copper—which reflects the market's attempt to price in the eventual tariff level. Since the probe was announced, the New York–London spread has traded between 6% and 15%, with the recent increase in steel and aluminium tariffs pushing the premium towards the higher end of the range.
The market is concerned that the current flow of copper heading to the US ahead of the tariff announcement will remain stranded until consumed, further tightening an already constrained global market into the second half of 2025. Although the US only accounts for around 6% of global refined demand, the domestic buildup may leave the rest of the world with critically low stocks of this key transition metal. Note since March, total stocks monitored by the three major futures exchanges are down 196 kt, and while LME and SHFE have seen declines of 112 kt and 163 kt, CME has witnessed tariff-related inflows of 79 kt, boosting stockpiles to a 2018 high at 183 kt.
Providing a technical perspective on the HG copper futures contract is difficult, given the two-way risks associated with the pending tariff decision. The London benchmark remains the best indicator of the global market situation. Following the April slump, which briefly pushed the price below USD 8,500 per tonne, it has since stabilised within a relatively tight USD 9,440–9,660 range, with some overnight weakness observed after the Caixin manufacturing PMI fell to 48.3 in May—its lowest level since September 2022.
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