U.S. Treasury yields rise, copper and precious metals under pressure
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By:新浪财经
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Source: CMEGroup
Summary:
Last week, the global financial markets continued to be impacted by tightening liquidity. The 30-year US Treasury yield nearly hit 5.20%, reaching the highest level since 2007. The 10-year US Treasury yield rose above 4.5%, and Japanese bond yields also rose, driving up market expectations for a Fed rate hike this year. As macro uncertainties increased, risk assets came under pressure. Copper prices experienced narrow-range fluctuations amid the tug-of-war between liquidity tightening and expectations of easing geopolitical tensions. Precious metals were noticeably pressured by the rise in US Treasury yields and rate hike expectations.
Key Insights
1
. Liquidity tightening dominates market sentiment; copper prices are resilient but gains are capped.
US and Japanese bond yields continued to rise as expectations for a Fed rate hike intensified (the market is pricing in nearly
50%
chance of a December hike). This brought greater macro headwinds. However, Trump’s claim that the US and Iran had
“
basically reached
”
an agreement and news that the Strait of Hormuz would reopen gave markets hope for geopolitical easing, supporting some risk appetite. As a result, copper prices settled into a pattern where
“
mine-side support forms the floor, macro pressures cap the ceiling,
”
and price movements are thus limited.
2
. Mine-side TC drops below -$107/ton, supply contraction continues
SMM
(Shanghai Metals Market) Import Copper Concentrate Index registered at
-107.39
USD
/
ton, breaking record lows for several weeks. In China,
copper concentrate imports in April dropped by
19.57%
year-on-year, and from January to April cumulatively edged down
0.8%
y/y, the first such decline since December
2020
.
April cathode copper output fell by
2.26%
month-on-month, and May is expected to further drop to
1,167,500
tons. The rigid contraction from mine to smelting sectors provides a firm bottom for copper prices with little room for a pullback.
3
. Precious metals remain pressured, hit by US bond yields and rate hike expectations
30
-year US Treasury yield almost reached
5.20%
, a new high since
2007
, with real interest rates surging. Walsh was officially sworn in as Fed Chair; his hawkish stance has intensified concerns about rate hikes. The preliminary value of the US
May Manufacturing PMI
rose to
55.3
, a 48-month high, further dampening expectations for rate cuts. Precious metals were clearly pressured, with
COMEX
gold dropping about
1.5%
to near
4,480
USD
/
oz. If expectations for easing geopolitical tension are realized, safe-haven demand will weaken further, with a short-term bearish tendency.
I. Review of the Basic Metals Market
COMEX/
SHFE Copper Market Observation
Last week, copper prices fluctuated within a narrow range with limited up and downside. COMEX copper traded between $6.14–6.40/lb, settling at $6.3805/lb, up about 1.37% for the week. The SHFE main copper contract traded between 103,000–105,600 yuan/ton, closing at 104,870 yuan/ton, a slight weekly uptick of 0.17%. At the start of the week, rising US treasury yields and weak domestic economic data pressured copper prices to as low as the 103,000-yuan/ton level. Midweek, after Trump claimed a
“
basic agreement
”
with Iran and announcement of a reopening Strait of Hormuz, risk appetite was boosted and copper rebounded to just shy of 105,600 yuan/ton. However, with doubts about the details and lingering liquidity concerns, copper retraced before the weekend. Overall, it presented a
“
supported below, capped above
”
fluctuating structure.
In terms of term structure,
COMEX
showed significant backwardation;
SHFE
near-month contracts had a discount of about
140
yuan
/
ton. The widening price spread reflects stalled domestic destocking and the coming off-season for consumption.
Chart
1
:
CFTC
Fund Net Positioning
II. Precious Metals Market Review
1.
Precious Metals Market Observation
Last week, precious metals were clearly under pressure, as soaring US treasury yields and escalating rate hike expectations formed a double whammy.
30
-year US Treasury yield almost hit
5.20%
, a new high since
2007
;
the 10
-year US Treasury yield surpassed
4.5%
, setting a new annual high. The probability of a
25bp
Fed rate hike in December rose to
42.5%
.
On May
22
, Kevin
Walsh was officially sworn in as Fed Chair and stressed in his speech that he would control inflation with
“
independence, clear judgement, and firm stance,
”
intensifying the market's concerns about tightening. The US May S&P Global Manufacturing PMI initial value unexpectedly rose to
55.3
, the highest in 48 months, while the Service PMI slipped to
50.9
, indicating the economy remains resilient.
Geopolitically, on the 23rd, Trump claimed the US and Iran had
“
basically reached
”
an agreement, and the Strait of Hormuz would reopen, causing crude oil to drop over
7%
intraday. However, there are still doubts about the details, and Iran has yet to officially confirm it—the previous Iranian plan was rejected by the US. The US Department of Defense continues to prepare for the possible resumption of military action against Iran. The situation remains volatile. Precious metals ran weakly amid expectations of easing geopolitics and macro pressures.
2
. Relative Prices and Volatility
Last week, the gold-silver ratio rose from around
62.8
to about
63.1
, with silver declining slightly more than gold. The gold-copper ratio ticked up, as copper remained range-bound and gold declined. The gold-oil ratio plunged, with oil prices collapsing after Trump announced progress in US-Iran talks, rapidly narrowing the gold-oil spread.
Gold
VIX
retreated from
25
to about
22
, showing a mild retreat in market panic but still remaining at high levels. Silver volatility stayed around
25
.
Chart
2
:
COMEX
Gold
/COMEX
Silver
Recently, the effect of CNY exchange rates has increased compared to earlier. Last week, the domestic/overseas price gap and ratio for gold ticked higher, while those for silver narrowed and rebounded.
3
. Inventory and Positioning
Chart
4
:
COMEX
Precious Metals Inventory
In terms of positions,
SPDR
Gold
ETF
holdings increased by
23
tons week-on-week to
1,101
tons;
SLV
Silver
ETF
holdings increased by
475
tons to
15,992
tons. As of now,
COMEX
gold non-commercial total positions are at
264,000
lots, with non-commercial longs down by
1,783
lots to
212,000
lots, and short positions down by
1,045
lots to
52,000
lots. Longs still dominate, but at a slightly lower ratio of
about 50.4%
from last week, and short positions at
about 12.5%
.
Chart
:
COMEX
Gold Positioning
III. Market Outlook
For copper: Short-term macro uncertainty is elevated, with higher US Treasury yields and weak domestic data capping copper’s upside potential. However, mine-side
TC
(treatment charges) dropping below
-$107
/ton, large declines in April copper concentrate imports, and further expected production cuts at domestic smelters in May, all provide a strong pricing bottom. If a US-Iran deal formalizes and the Strait of Hormuz reopens, global supply chain anxieties would ease, but risk premiums may also normalize lower. Short-term, copper prices are likely to stay buoyant but with limited volatility.
Precious metals: Macro headwinds remain dominant in the near term. Rising Treasury yields, Walsh’s hawkish stance, and firmer rate hike expectations all weigh on precious metals. Should the US and Iran finalize a deal, safe-haven demand could fade further. However, resilient inflation and continued central bank gold purchases still provide long-term support.
Focus and Risk Warning
:
Final details of the US-Iran agreement and real progress on reopening the Strait of Hormuz; Walsh’s first
FOMC
statement; US
April
PCE
data (released on
May
29
); China’s
May
official Manufacturing
PMI
(on
May
31
); whether domestic social copper inventories can resume declining; and the progress of China-US economic and trade negotiations.
Editor: Zhu Hennan
0
0
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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