In May, U.S. inflation moderated with CPI, PPI, and PCE all cooling. The Fed’s closely-watched “super core inflation” declined MoM for the first time since April 2020, primarily driven by lower service costs, especially in financial services and insurance. Despite Trump’s calls, Powell maintained the Fed’s wait-and-see approach, reiterating no rush to cut rates. While gold faced pressure from risk asset rallies amid easing trade tensions, it found support after Moody’s downgraded U.S. sovereign rating and the House passed Trump’s “OBBB”. Market concerns over U.S. government debt intensified, leading to higher Treasury yields but a weaker dollar. The “TACO trade” gained popularity among Wall Street and retail investors, based on the belief that Trump typically retreats after aggressive trade stance. This led to buy-the-dip opportunities in U.S. stocks, with major indices recovering losses. Gold producers saw modest monthly gains, with Hong Kong-listed stocks, especially small-mid caps outperforming. Copper prices rose on tight supply, benefiting producers. In China, April’s new social financing fell below expectations at 1.16 trillion yuan, though the growth rate rose from 8.4% to 8.7%. Government bonds dominated new financing, while RMB loans weakened.
Looking ahead to June, with deteriorating Trump-Elon relations and escalating Russia-Ukraine tensions, we plan to increase positions in gold companies during dips while monitoring potential catch-up rallies in silver and platinum group metals.