Copper Market Update – May Overview
Copper prices began May on a strong note, rallying sharply on Friday, May 2, driven by optimism surrounding easing trade tensions between the United States and China. This momentum continued into the following week, supported by a weaker U.S. dollar, which made commodities priced in dollars more attractive.
However, by around May 9, prices began to retreat as investors grew cautious about the outcome of ongoing U.S.-China trade negotiations. Market participants were also digesting mixed economic data from China. While the country’s trade balance came in slightly below expectations, both exports and imports demonstrated resilience despite ongoing tariff pressures.
The subsequent week saw copper prices edge higher again, buoyed by renewed investor optimism that easing trade frictions with China—the world’s largest copper importer—could bolster the outlook for industrial metals. Nonetheless, gains were limited as traders awaited the upcoming U.S. Producer Price Index (PPI) report, due Thursday, which was expected to provide further insights into inflation trends and the broader health of the U.S. economy.
During the week of May 19, copper prices remained relatively steady as investors processed a mixed set of economic indicators from China. Industrial production for April grew more than anticipated, suggesting stable factory activity despite weakening foreign demand caused by heightened U.S. tariffs. However, other key metrics, including fixed asset investment and retail sales, fell short of expectations, indicating underlying weakness in domestic business investment and consumer spending.
Overall, the data pointed to a degree of softness in China’s economy during the peak of trade tensions. Nonetheless, the partial de-escalation of trade hostilities earlier in May sparked hopes for an economic rebound in the coming months.
May was characterised by significant volatility and challenging trading conditions, largely due to the shifting dynamics of the U.S.-China trade relationship. While better-than-expected Chinese industrial production data offered some reassurance, broader economic signals suggested ongoing headwinds. The fragile optimism was tempered by geopolitical uncertainty, particularly toward the end of the month, when President Trump alleged that China had violated aspects of the existing trade agreement—casting renewed doubt over the path forward.
Gold Market Update – May Overview
Gold opened May on a cautiously optimistic note amid renewed hopes for progress in U.S.-China trade talks. On Friday, May 2, China announced that it was open to resuming negotiations, emphasizing that any dialogue must be based on mutual respect and the removal of unilateral tariffs. Reports from Chinese state-affiliated media indicated that the U.S. had also reached out to initiate discussions.
However, this optimism was short-lived. By the following Monday, gold prices surged sharply—approaching near all-time highs—as renewed tariff concerns unsettled markets. President Donald Trump signed an executive order aimed at strengthening domestic pharmaceutical manufacturing and hinted at potential new import tariffs within the sector. Additionally, he proposed a 100% tariff on all foreign-produced films shown in the United States, further escalating trade uncertainty.
These developments, combined with investor caution ahead of the Federal Reserve’s policy meeting, spurred strong demand for safe-haven assets like gold. Despite Treasury Secretary Scott Bessent’s comments suggesting progress in trade discussions was expected, the mixed messaging and threat of further tariffs kept markets on edge.
Midweek brought a brief reprieve, with renewed optimism stemming from a newly signed U.S.-U.K. trade framework. Under the agreement, the existing 10% U.S. tariff on U.K. imports remained, while the U.K. agreed to reduce its tariffs to 1.8% from 5.1%. President Trump also expressed expectations for meaningful negotiations with China, as both countries prepared to resume talks over the weekend. Commerce Secretary Howard Lutnick added that the U.S. was planning numerous trade deals but was likely to maintain a baseline 10% tariff across the board.
Gold, which typically gains during periods of geopolitical and economic uncertainty, experienced some volatility. Prices dipped temporarily amid hopes for easing U.S.-China trade tensions and a softer-than-expected U.S. inflation reading, both of which weighed on safe-haven demand.
On Monday, May 12th, gold prices saw additional downside after the U.S. and China agreed to temporarily scale back tariffs—reducing them to 30% and 10% respectively for a 90-day period. The move alleviated recession fears and boosted risk appetite across broader markets, further pressuring gold.
However, this trend reversed during the week of May 19, when Moody’s downgraded the U.S. credit rating from ‘Aaa’ to ‘Aa1’. The downgrade cited concerns over rising federal debt levels and unsustainable fiscal spending, reigniting market fears over the long-term stability of the U.S. economy. The outlook was further clouded by the administration’s proposed tax cuts, which could widen the deficit.
Geopolitical tensions also flared late in the month, as reports emerged of potential Israeli military action against Iran. Indications of military buildup and regional instability prompted renewed inflows into gold as a safe-haven asset.
By the start of June, gold prices spiked again following President Trump’s announcement that China had violated existing trade agreements—reintroducing uncertainty and reinforcing investor demand for risk-off assets.
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