Stronger Dollar Sends Metals Lower

GOLD

Gold futures are lower, as the dollar strengthened following the strong uptick in PPI inflation, which could complicate the Fed’s future rate path and reduce the amount of easing this year. Core PPI, which excludes volatile food, energy, and trade services, rose 0.9% in July, the largest monthly gain in over three years, and is up 3.7% year-over-year, suggesting that underlying inflationary pressures are firming and not just driven by temporary shocks. The rise in prices could complicate the Fed’s path moving forward, especially if CPI inflation begins to follow suit, as companies will likely adjust their prices. With core services inflation still elevated, the central bank may maintain its restrictive policy stance for longer, reinforcing the higher-for-longer narrative, dependent on labor market conditions.

On the geopolitical front, President Trump warned of “severe consequences” if Russian President Vladimir Putin does not agree to peace in Ukraine but indicated that a follow-up meeting including Ukraine’s leader could quickly follow. The US and Russian presidents are set to meet in Alaska tomorrow in a bid to advance a resolution to the conflict.

Investors will closely monitor the retail sales data out Friday for more clues on the Fed’s rate path. On the trade front, President Trump signed an executive order extending the tariff truce between the US and China for another 90 days, pushing trade negotiations out to the fall. China also announced the extension of the tariff pause on state media.

SILVER

Silver futures are lower, pressured by a stronger dollar as a result of the hotter-than-expected PPI inflation. Silver prices remain supported by a persistent structural supply deficit and strong investor interest. Industrial demand, especially from energy sectors like solar power, EVs, and electronics, continues to grow, with solar alone making up 17% of total demand last year, triple its share a decade ago. Global mine supply has dropped 7% since 2016, contributing to an estimated 800 million oz. shortfall from 2021 to 2025. Investor demand through silver-backed ETPs also plays a major role, with 95 million oz. in net inflows in H1 2025 and over 1.1 billion oz. drawn from mobile inventory since 2019. Despite recent tariff-related headwinds, silver’s long-term outlook remains strong due to its critical role in clean energy technologies, as evidenced by rising solar capacity in China and Europe and resilient semiconductor demand.

COPPER

Copper futures are lower, pressured by a stronger dollar and as traders await clarity on the Ukraine war and the demand picture in China. Copper prices were lower on Wednesday as support from the US-China trade truce faded and as a set of data from China showed that new yuan loans dropped unexpectedly in July. A sign of weak demand in the economy despite Beijing’s efforts to bolster domestic demand, as the level of loans contracted for the first time in 20 years. However, outstanding total social financing, used by analysts as a gauge of industrial metals demand, rose 9%, hitting the highest level since February 2024.

Chile’s state copper commission slashed its 2025 growth estimate for the country’s production, saying it expects an increase of 1.5% from last year, down from the 3% it had forecasted in May. The commission said the slide in forecast growth was due to a June decline in production at BHP’s Escondida mine, the largest copper deposit in the world, and at Collahuasi, which is jointly run by Anglo American and Glencore. It also said that the recent deadly collapse at Codelco’s El Teniente mine could pose a “significant risk of supply disruption.” Chile recently allowed mining to resume at Codelco’s El Teniente mine.

The rapid expansion of artificial intelligence data centers is expected to significantly tighten the global copper market, potentially leading to a supply shortfall of 6 million tons by 2035, according to a new report from BloombergNEF. Analysts project that copper demand from AI data centers will average around 400,000 tons annually over the next decade, peaking at 572,000 tons in 2028. By 2035, cumulative copper usage by data centers could exceed 4.3 million tons, adding to the already surging demand from sectors like power transmission and wind energy, where copper consumption is anticipated to nearly double. Copper plays a critical role in data center infrastructure, accounting for up to 6% of capital expenditure due to its superior electrical and thermal conductivity, as well as its ductility and malleability, which make it ideal for compact components like connectors. Meanwhile, North American data center infrastructure is projected to grow dramatically, from a $33 billion industry in 2020 to $70 billion by 2030 and $185 billion by 2040.

Traders are closely watching the large copper shipments that arrived in the US ahead of broad tariffs. Price spreads between London, New York, and Shanghai will guide metal flows, with US copper futures currently trading about $130/ton above LME prices, narrowing the incentive for exports. Any deviation beyond a $100–$200 spread between CME and LME is likely to trigger shifts in copper movement.

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