The equity markets aren't the only ones pricing in anticipated Fed rate cuts. The metals and energy markets have also shown significant optimism over the past several weeks. As of this morning, copper is up 7.3%, silver has gained 4.9%, and palladium has risen over 6.4% this week alone. While these products experienced pullbacks last month, they have now established considerable near-term consolidation patterns, making the technical conditions favorable for a near-term price bounce. But will this bounce last?

From a holistic perspective, the outlook on global industrial production is mixed. In the United States, the ISM Manufacturing Index continues to slide into contractionary territory, with a recent print of 48.5, down from 48.7, along with the ISM Manufacturing New Orders Index. Conversely, E.U. countries posted stronger-than-expected PMIs this week. Although still in contractionary territory, there may be signs of a bottoming-out, suggesting the E.U. could begin recovering from last year's economic contraction. Lastly, hopes for a robust stimulus policy from China have fallen short of market enthusiasm in the first half of the year. However, positive developments on the CPI front indicate that some stimulus measures are beginning to reflect in national data.

Remember the copper shortage narrative from late April? It appears that the hype was greater than the physical market conditions. While there is an undeniable long-term structural issue with physical copper ore supply, recent physical supply increases in June have led to a buildup in LME warehouse stockpiles. This would not happen if there were an immediate global shortage.

Overall, the price advances in copper and palladium may be short-lived unless global fundamental data changes or warehouse stockpiles begin to see significant draws. Silver, on the other hand, is unique as both an industrial and precious metal. Traders appear to be using it as a proxy for hedging Fed rate cut expectations and potential global industrial growth, particularly in A.I. and electronics demand.

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