Written Commentary
SILVER
September silver futures are higher and are close to the 29.60 level in advance of major U.S. economic reports that could shed light on the outlook for Federal Reserve monetary policy. Countering the bullish influence of a Federal Reserve pivot to accommodation are indications of demand weakness from a major silver consumer in Asia.
Silver prices were firm earlier this year on the belief that demand from the clean energy sector would outpace supply. However, there are renewed concerns about the global demand situation in light of prospects of increased U.S. trade restrictions in the high-tech area.
GOLD
August gold futures advanced to the 2424 level in light of increasing prospects of a more accommodative Federal Reserve this year. Although there is a 95% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at 5.25% to 5.50% at its July 31 policy meeting, financial futures markets are now pricing in three 25 basis point cuts in the fed funds rate this year.
There is a 95% probability that the FOMC will lower its fed funds rate by 25 basis points at its September 18 meeting. In addition, the probability of an additional rate reduction from the FOMC at the November 7 meeting is 60%, and there is a 56% chance of another 25-basis point rate cut at the December 18 meeting.
Traders are looking ahead to tomorrow’s advance estimate for the second quarter gross domestic product report and Friday’s personal income and consumer sentiment reports.
The long term fundamentals for gold are bullish on balance.
COPPER
September copper futures are lower and are at the lowest levels since April 3 as demand concerns remain, especially in a major copper consumer in Asia. On the supply side, copper inventories in LME warehouses increased to the highest since September 2021.
The bulls on this market remain optimistic on the belief that copper prices may find support from improving sentiment in India after the government said it will continue spending on infrastructure projects. In addition, there is some support on the belief that the Federal Reserve will begin cutting interest rates in September, which could boost economic growth and overall demand for copper and industrial commodities in general.
The next major chart support for September copper futures comes in at 4.0690, which is where futures broke out to the upside from a downtrend line.
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