Source: Golden Ten Data

As investors' demand for the entire metals market has soared, and people are increasingly optimistic that the Federal Reserve will cut interest rates this year, traders have increased their bets on the possibility that the Fed may cut interest rates as early as September in recent trading days. Early trading in the Asian market on Monday (May 20) saw a full explosion in metal prices.

Spot gold rose more than 1% during the day, reaching a high of 2440.69 US dollars/ounce, breaking the record high of 2431.43 US dollars/ounce set in April. COMEX's most active gold futures contract instantly traded 2,539 lots within one minute from 09:00 to 09:01 Beijing time on May 20, with a total contract value of US$619 million.

Spot silver reached the 32 US dollars/ounce mark, continuing to hit a new high in 11 years, and rose 1.9% during the day. The main contract of the Bank of Shanghai hit a rise or fall, with an increase of 8% to 8,211 yuan/kg.

Data released on Wednesday showed that US inflation slowed more than expected in April, the US dollar fell last week, and US Treasury bonds rebounded (yields fell). This provides support for precious metals prices. The latest data from the US Commodity Futures Trading Commission (CFTC) shows that in the week ending May 14, hedge funds raised their bullish gold bets to the highest point in three weeks.

Elsewhere, geopolitical risks in Russia and the Middle East have once again intensified. Ukrainian drones attacked a small Russian refinery last Sunday, causing it to stop operating, while an oil tanker bound for China was attacked by Houthi missiles in the Red Sea last Saturday. Precious metals are one of the assets that often benefit from safe-haven requirements.

In addition to precious metals, non-ferrous metal futures also surged across the board. The main contract for Shanghai Nickel surged 6.00% during the day and is currently reported at 159,500.00 yuan/ton. The main contract between Shanghai and Tin surged 4.00% during the day and is now reported at 285710.00 yuan/ton. The main international copper futures contract rose more than 5%. Copper futures hit a record high of 10,848 US dollars/ton.

Asia Pacific stock indices also rose sharply. The Nikkei 225 index rose 1% during the day. Japan's TSE Index rose 1% to 2773.09 points. FTSE China A50 Index futures opened 0.45% higher. The MSCI AC Asia Pacific Index (MSCI AC Asia Pacific Index) rose for the seventh consecutive trading day. “We continue to expect the Federal Reserve to cut interest rates by 50 basis points this year and cut interest rates further in 2025 and 2026,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management. “This has created a healthy macro environment that supports our investment recommendations for high-quality bonds and high-quality stocks.”

According to foreign media reports, investors are piling up to invest in metals, and bullish investors are pouring in one after another, and bearish bets are being destroyed. Nickel prices surged nearly 8% last week. London copper prices have soared to record levels, and the global copper market is being affected by a bear squeeze centered on the New York Mercantile Exchange (Comex). Precious metals also surged last Friday. Silver soared to a 1-year high, and gold rebounded to its historic peak reached in April.

Phil Streible (Phil Streible), chief market strategist at Blue Line Futures (Blue Line Futures), said that the strong rise in copper is affecting silver because silver is also considered an industrial commodity and is used in products such as solar panels.

“There are three factors that affect commodities: supply, demand, and price dynamics,” Strible said. Silver “now has all three.”

Since this year, both industrial metals and precious metals have soared due to a surge in investor interest. The macroeconomic background is improving, and supply in many physical markets is tightening at the same time.

Matthew Heap, portfolio manager at Orion Resource Partners, the world's largest metal-focused fund management company, said in an interview last week: “Although many Western funds missed the rise in gold, it is clear that they are very eager to participate in copper investments. This reflects the fact that thematically speaking, the copper story is very clear, and you can explain why the price of copper is likely to rebound sharply from now on when taking the elevator. (Meaning the price is like getting on an elevator)”

Supply disruptions caught many traders by surprise, fueling large fluctuations caused by short position holders competing to close contracts. Nickel prices on the London Metal Exchange surged 7.9% last Friday after violent protests broke out in New Caledonia, the world's third-largest supplier of nickel.

Al Munro, a basic metals strategist at Marex in London, said: “While people are talking about poor demand right now, we are also facing supply issues — just like what you've seen with copper and nickel. We are a futures market, what future are we talking about? Great demand.”

Over the past few months, the copper market has been in a tug-of-war between long and short. Bulls believe that supply is tight and strong demand is imminent, while cautious traders have warned of China's historic weak spot demand. But last week, the balance of power changed drastically, and the rush to buy in the New York market caused short position holders to suffer significant losses at market prices. On Friday, the Comex copper market showed new signs of tension, and the previous month's contract rebounded from the record set last Wednesday. Many traders have been betting that the exchange's price will fall relative to the Shanghai and London benchmarks, and the sharp rise in prices puts them at risk of significant additional margin.

Currently, the global copper market is scrambling to buy copper to be delivered to the exchange before the July contract expires, but traders are battling supply restrictions and shipping bottlenecks.

Editor/jayden