As the Middle East conflict enters its fourth week, commodity markets showed divergence this week—industrial metals stabilized and rebounded, while gold struggled to reverse its downtrend despite a significant intraday rebound. London copper accumulated a gain of over 2% this week, marking its first weekly increase since the outbreak of the US-Iran conflict. The primary driver was a sharp decline in Chinese inventories, which boosted expectations of recovering demand.
During early Friday trading in U.S. markets, spot gold rose above $4,554.90, climbing nearly 4.1% intraday, while the main New York gold futures contract reached $4,552.10, with a slightly over 4% gain.
However, due to a sharp drop of more than 10% on Monday, the front-month gold futures contract still ended the week with a cumulative decline of nearly 2%, extending its losing streak to four weeks—the longest weekly decline in nearly three years. President Trump once again postponed the deadline for launching strikes against Iran, raising market hopes for a de-escalation of tensions. However, Iran rejected the 15-point ceasefire proposal from the U.S., and missile exchanges between the two sides continued, indicating no substantial easing of tensions. Oil prices remained above $110 per barrel, with persistent inflationary pressures further limiting the Federal Reserve's room for interest rate cuts—markets have fully priced in expectations of no rate cuts until 2026.
Most industrial metals posted weekly gains, with London tin rising nearly 6%.
Base metals traded on the London Metal Exchange (LME) broadly recovered losses this week. London copper recorded its first weekly gain since the outbreak of the US-Iran conflict, marking a clear contrast to its three consecutive weeks of declines. LME copper futures rose by $48, gaining nearly 0.4% to $12,195 per ton, with a weekly increase of 2.22%. London tin stood out on Friday, with LME tin futures rising by $1,663, gaining nearly 3.77% to $45,788 per ton, hitting its highest level since March 17 and accumulating a weekly gain of 5.8%. Its performance led the base metals sector for the week. London aluminum rose 2.52% for the week, while zinc gained 1.57%, both refreshing multi-day highs. Nickel edged up 0.98% for the week but fell for the second consecutive day on Friday. Lead ended the week unchanged. Aluminum's strong performance had a specific backdrop—the Strait of Hormuz is effectively blocked, cutting off approximately 9% of global aluminum supply. Reports indicate that Japanese buyers agreed to pay the highest aluminum premium in 11 years this week, a cost pressure expected to pass down to downstream manufacturers, further exacerbating inflation.
Recovering Chinese demand provided support for copper prices.
The core driver of copper's rebound this week came from signals of demand in China. Reports showed that copper inventories on the Shanghai Futures Exchange recorded their largest weekly decline this year, the second-largest single-week drop in history. Analysts believe that the sharp decline in copper prices earlier triggered restocking demand from manufacturers, leading to a rebound in orders. However, market sentiment has not fully recovered. Harry Jiang, a trader at Zhongji Ningbo Group, noted that while the U.S. has offered some negotiation rhetoric, tensions have hardly eased, and many traders are adopting a wait-and-see approach. Uncertainty in the Middle East remains a major macroeconomic factor suppressing industrial metals. The prolonged conflict continues to drive up energy and fertilizer prices, intensifying global inflation expectations and weighing on economic growth prospects, thereby pressuring the outlook for industrial demand.
Gold futures recorded the longest weekly losing streak in nearly three years.
Gold rebounded intraday on Friday but failed to reverse its weekly decline. The front-month COMEX gold futures contract for March delivery rose 2.66% to settle at $4,492 per ounce but still ended the week down 1.72%, marking the longest weekly losing streak since April 18, 2023. Over the past four weeks, gold has fallen 14.12%. Daniel Pavilonis, a senior market strategist at RJO Futures, believes the recent pullback has created a buying opportunity: "The market has fallen significantly... prices broke below the 200-day moving average... This is a rare chance to buy." He expects gold prices to rise gradually in the coming weeks and suggests that once tensions with Iran ease, market risk appetite will have a better chance of recovery.
Gold's safe-haven status is questioned, with central bank sales adding pressure.
Gold's unusual performance has prompted Wall Street institutions to reevaluate its role as a safe-haven asset. Analysts at Saxo Bank noted in a research report that the price action indicates "gold has transformed into a source of liquidity during supply-driven macroeconomic shocks, behaving more like a risk asset and moving in tandem with overall market stress, failing to provide traditional safe-haven support." Carsten Menke, an analyst at Julius Baer, pointed out that central bank gold reserve sales are adding additional pressure on gold prices. He noted that Turkey has sold approximately 54 tons of gold since the outbreak of the Iran war to support the lira, and Poland is also considering sales. Menke emphasized that passive selling is more concerning than active rebalancing, as the former lacks controllability, and he expects short-term volatility to remain high. Despite this, some institutions maintain a long-term optimistic outlook on gold. Commerzbank raised its gold price forecast, lifting the year-end target from $4,900 to $5,000 per ounce, arguing that the recent pullback is unlikely to persist. The bank expects the Iran war to end in the spring, which would temper market expectations of Fed rate hikes. It also anticipates the Fed to resume rate cuts later this year, with a cumulative reduction of about 75 basis points by mid-next year.