Commodities Monthly Report � Motilal Oswal Financial Services Ltd

2025-07-03 10:03:24 am | Source: Motilal Oswal Financial Services Ltd

Commodities Monthly Report � Motilal Oswal Financial Services Ltd

News By Tags | #CommodityTips #MotilalOswalFinancialServicesLtd

Precious Metals

• Gold prices crossed ?1 lakh for first time on domestic front amid heightened Middle East tensions

• Silver prices witnessed significant rally sustaining above Rs.1 lakh mark and marking 2012 high on COMEX

• Escalating Israel-Iran conflict triggered strong safe-haven demand for bullion

• Iran's retaliation to Israeli strikes on nuclear facilities kept markets volatile

• Iranian control over Strait of Hormuz was a key risk for market

• However, a brokered ceasefire eased geopolitical tensions, weighing on prices

• President Trump has been actively trying to ease off the geo-political tensions esp. in middle east

• Optimism regarding trade talks also put cold water on gold bulls

• Mixed U.S. economic data led to uncertainty over the Fed's rate path

• Weaker-than-expected U.S. retail, industrial data, consumer confidence and GDP raised slowdown fears

• While, strong U.S. job data initially pressured gold, but geopolitical risks offset the pressure

• Dollar Index fell sharply towards 97 mark, while USDINR also fell by more than Rs.1 weighing on domestic prices

• Fed Chair Powell signalled caution, delaying aggressive rate cut expectations

• Markets now price in a 50bps rate cut by the Fed in 2025, and one each in 2026, 2027

Gold taking a pause while Silver continues to shine

Dollar index and USDINR in-sync once again

Precious Metals

• China’s central bank added to gold reserves for a seventh straight month, however the quantity is reduced by a lot

• Silver witnessed profit-booking from record domestic highs, but shows resilience amidst up move in industrial metals

• Rising U.S. tariffs raised inflation concerns, adding complexity to Fed’s outlook

• Managed net position for Gold increased by more than 11% while, the same for silver was up by ~35%

• Total Gold ETF also witnessed an inflow and was up by more than 3% on MoM basis

• Gold/Silver ratio witnessed a fall from ~100 levels to ~90 justifying positive move in Silver prices

• Market focus shifted toward upcoming U.S. GDP, PCE, and PMI data

• Focus is also on Geo-political and Trump’s Tariff development

• Updates on Tax cut bill will also be important to keep an eye on

• Gold could consolidate in a broad range, while silver could trade with a positive bias, for this month

• We recently released a note “We Call It Quits” for Gold buyers. Some ease off is possible in near term, giving buyers opportunity to enter once again

Gold/Silver ratio reversing from the recent peaks

SPDR Holding continued to witness inflows after a dip in previous month

Base Metals- Copper

• MCX Copper continues to add gains with 4% upside in June, marking second consecutive month of gains

• Rally in prices were driven by weaker U.S. dollar and depleting inventories in the LME and SHFE warehouse

• Global markets experienced volatility due to geopolitical turmoil and supply disruptions, particularly in metals

• Strait of Hormuz, a key shipping route for oil and raw materials, has been a source of concern, leading to increased metal prices due to supply chain disruptions

• COMEX stocks surged to nearly 200,000 tonnes, the highest since August 2018, as shippers rushed material to the US ahead of tariffs

• LME stocks dropped over 60% year-to-date to about 103,000 tonnes

• Global refined copper production rose 6% YoY in April on continued expansion in China and the DRC

• Refined copper consumption declined by 7% yoy in April, driven primarily by a slowdown in China, where demand slipped by 1%

• Global refined copper market showed a 50,000 metric tons deficit in April, compared with a 12,000 metric tons surplus in March, acc. to ICSG

• Copper stocks are running low, causing strong backwardation in futures prices. The LME cash–3M spread has widened past $100, showing there’s a shortage of copper for immediate delivery.

• Overall, copper prices remain supported by softer dollar, tightening supplies and easing trade tensions

Inventories have been depleting at a rapid pace on LME and SHFE

Cash-3M has been over $100 since the past weeks

Base Metals- Zinc

• Zinc prices reversed losses since the start of the year adding 3% gain last month, but is still underperforming most base metals

• LME zinc warehouse stocks dropped 15% to ~117,000 tonnes this month, providing some support to prices

• Global market for refined zinc metal was in surplus by 151000 over the first four months of 2025 with total reported inventories decreasing by 53000

• Chinese imports continue to surprise with 491,522 tonnes of zinc concentrates imports in May, up 84% YoY

• Zinc demand growth forecast has been revised down to only 1% for 2025 due to economic uncertainty

• Investment funds remain bearish, reducing net long positions

• Estimated consumption for April 2025 in China dropped 3% YoY, and 3% Jan-Apr YoY

• Weak manufacturing activity, especially in China, continues to weigh on sentiment, reinforcing concerns over reduced consumption

• Teck Resources’ Red Dog Mine in Alaska saw production fall 20% in Q1 2025

• Australian smelter Nyrstar plans to cut output by 25% this year due to low treatment charges

• While a weaker dollar could lend some support, lingering demand concerns may keep prices pressured.

Inventories continue to fall at a steady pace

Weakening DXY supporting metal prices on the lower end

Base Metals- Aluminium

• Aluminum prices added ~5%, on Middle East tensions and Strait of Hormuz risk

• Concerns over potential disruptions to the Strait of Hormuz, closure of which would knock out ~6% of world’s total aluminium supply

• Prices initially spiked in response to the crisis, but stabilized after Iran-Israel ceasefire

• US aluminium imports in April dropped 20% YoY and 36% YoY after imposition of tariffs

• China’s aluminium imports from Russia doubled, making up 70% of total imports in April

• Global aluminium consumption reached 5.86 million tonnes in April

• Alumina prices eased 2% in June after surging in May, as China entered its seasonal demand slowdown

• Uncertainty on the worldwide supply of bauxite persisted with the Guinean government's disagreements with Emirates Global Aluminum's mining operations, putting mining licenses at risk

• Chinese economic data also supported, with retail sales in May rising by 6.4% YoY, exceeding April’s 5.1% increase

• Prices are expected to remain supported by healthy consumption data and risk to raw material supply.

Inventories have been depleting at a fast pace

Retail Sales have inched higher since the beginning of the year

Crude Oil

• Oil prices had a roller coaster ride last month, with crude spiking by 15% from lows on back of Israel – Iran tensions, followed by subsequent bombing from the US but party didn’t last long with cease fire between the 2 nations, brokered by President Trump.

• Market anticipated supply disruption risk premium rise on expectation of Closure of Strait of Hurmuz, but all it fizzled post cease fire announcement.

• Key OPEC+ members could consider another 411,000 barrel-a-day increase for August, 4th consecutive month of planned increases, tripling the initially planned volumes

• Chinese and Indian demand remains strong, though it remains uncertain whether it is a sustained demand recovery or is merely due to temporary factors

• While OPEC+ is curbing exports through Q3, geopolitical disruption risks persist. U.S. producers have filled a crucial gap in Atlantic Basin markets by increasing their output

• Product inventories witness a substantial drawdown, with crude inventories approximately 11% below the five-year average for this time of year

• Post Iran-Israel truce, hedge funds have increased their bearish bets as geopolitical risk premium fade

• Investors will closely monitor trade talks, with only 10 days remaining until Trump’s country-specific tariffs are set to resume

• The true test will be whether summer travel demand can absorb the additional supplies OPEC plans to introduce; otherwise, prices could face steep sell-off pressure

Non-OPEC+ producers are set to drive most of the increase

Strong Demand in Product stock inventories