The Market

On Thursday, the prices of copper declined due to mundane trade data from China, the largest consumer of the metal. This gloomy economic outlook for the country weighed on the demand prospects for copper.  An LME report revealed that as of April 30, the share of Russian copper stocks fell from 48% in March to 37.5%, which is equivalent to 23,200 tonnes, while nickel slightly declined from 22.5% in March to 21%, which is equivalent to 7,170 tonnes.

According to data released on Wednesday, Chinese imports experienced a significant contraction in April, while exports saw a slower rate of growth. These figures further confirm the weak domestic demand in spite of the lifting of COVID restrictions.

London Metal Exchange’s three-month copper, CMCU3, declined slightly by 0.1% to $8,455 per tonne at 0635 GMT. LME aluminium, CMAL3, dropped by 0.7% to $2,251 per tonne after reaching $2,213.5, its lowest since October 31. Nickel, CMNI3, also decreased by 1.4% to $22,215, touching its lowest since October 31, which was at $22,017. Zinc, CMZN3, fell by 0.7% to $2,6012.5, hitting $2,580, its lowest level since March 2021.

The London metals market was able to maintain its prices due to a weaker US dollar resulting from slower inflation in the US. A softer dollar makes metals priced in US dollars cheaper for holders of other currencies.

The price of aluminium has been boosted by indications of improving interest rates and the debt ceiling, along with a decrease in the US inflation rate. However, despite these positive developments, uncertainties still persist in the market. For a full recovery of domestic demand, favourable policies will be necessary.

According to data from the London Metal Exchange (LME) website on Wednesday, the share of Russian aluminium stocks in LME-registered warehouses slightly decreased to 51% of the total, equivalent to 256,125 tonnes in April, compared to 50% in March. The aluminium market has been closely monitoring the share of Russian metal, which is used in various industries such as transport, construction, and packaging, due to some consumers avoiding Russian metal following Moscow’s invasion of Ukraine.

Although the overall aluminium stocks on the LME have increased by 27.6% this year to 570,150 tonnes, Russian metals have not been banned from trading and storage in the LME system. This is because there are no Western sanctions on the metals or major Russian producers such as aluminium producer Rusal or nickel and copper producer Nornickel.

After a volatile session yesterday, gold prices have stabilized somewhat. The precious metal came close to breaching the psychological $2055 level before a sudden sell-off left it in the red by the end of the day. This morning, gold prices have continued to decline as the Dollar Index (DXY) reached a one-week high. Despite growing uncertainty around a global recession, gold remains supported. However, it is struggling to convincingly surpass the $2055 mark, and from a technical standpoint, there is an increasing case for bearish interest.

During Thursday’s trading session, silver experienced a significant drop, reaching the $27 level, which is a psychologically important round number. Despite this, it is likely that buyers will enter the market at this level. However, even if the market falls below $27, there is a possibility that it could reach the 50-day Exponential Moving Average (EMA) near the $26.50 level.
It is worth noting that the US Dollar Index often has a negative correlation with silver, so it is important to pay attention to that as well.

Ultimately, the US dollar’s movements will likely play a role in determining the next direction for silver. Due to the high volatility of silver, it is recommended to keep position sizes reasonable.