Prices & Review

Overview (February 2025)

Markets have been preoccupied with President Donald Trump’s unpredictable policy initiatives, which are affecting, or threatening to affect, global trade flows, especially those into the US, geopolitics and macro-economics. The copper, aluminium and gold markets have already been significantly skewed by the threat of tariffs with large premiums seen either in CME prices or in US physical premiums, for example Comex copper prices have traded at a premium that at times has been $1,000pmt above LME prices, Comex gold prices have traded $60 per oz above the London price and US aluminium premiums have all but doubled to 40 cents per pound, from 22 cents per pound at the start of the year.

The US, being a large importer of all these metals, the impact of tariffs is likely to become a significant headwind for US manufacturers and consumers, which could have an on the economy and on the country’s inflation. This could lead to higher interest rates, which would have global implications for countries and companies with US denominated debt. At the moment, however, the market seems more concerned about policy changes leading to economic weakness than to inflation. Towards, the end of February, the largest fall in US confidence data since August 2021, prompted investors to ask whether Trump’s tariffs and cutbacks on government spending/employment could push the US economy into recession.

Equites sold off on February 25 and US government bonds climbed, suggesting investors were shifting to a more defensive stance - something that gold investors have been doing for many months. However, despite the inflationary impact of potential tariffs, weaker economic data caused U.S. Treasury yields to decline, which in turn dragged the US dollar down. US 10-year treasury yields had fallen to 4.3% as of late-February, having started the month at 4.56% and the US dollar fell to a low of around 106 basis the Dollar Index in late-February, from a peak of around 110 in mid-January. The recent weaker economic data has led investors to anticipate a 50-basis-point rate cut by the Federal Reserve this year, up from the previously expected 40 basis points.
Metal prices have had a mixed time – they generally started the month on a strong note as Canadian and Mexican tariffs were delayed and the dollar weakened, but pulled back into month-end when concerns rose that Trump’s policies could weigh on the US economy. With so much uncertainty on so many fronts, gold has remained strong, setting a series of fresh record highs and being up 12.6% since the start of the year.