Written Commentary
GOLD
August gold futures are higher for a second today after last Wednesday advancing to a record high. Recent strength in gold is linked to increasing prospects that the Federal Open Market Committee will pivot to accommodation more aggressively in 2024. There is a 97% probability that the FOMC will keep its fed funds rate unchanged at 5.25% to 5.50% at its July 31 policy meeting. However, there is a 94% 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 has now been moved up to the November 7 meeting where there is a 52% chance of another 25 basis point cut in the fed funds rate.
Traders are focusing on this week’s advance estimate for the second quarter gross domestic product report, personal spending and income, and the June PCE price index.
SILVER
September silver futures declined to the lowest level since May 14 due to a weakening demand outlook. Some of the weakness in silver prices can be linked to the recent recovery in the U.S. dollar index. However, gains in the greenback are likely to be limited in light of increasing prospects of the Federal Reserve pivoting to accommodation this year with the increasing probabilities of two interest rate cuts in 2024. Some of the pressure was limited by recent comments from Federal Reserve officials indicating a more accommodative monetary policy this year.
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.
COPPER
September copper futures fell to their lowest level since April 3. Much of the weakness is due to concerns about demand from a top copper consuming country in Asia. Strength in the U.S. dollar contributed to the pressure on copper prices, although the Federal Reserve is widely expected to start cutting interest rates in September which could limit U.S. dollar gains.
On the supply side, copper inventories in LME warehouses increased to the highest level since September 2021.
The next major chart support for September copper futures comes in at 4.069, which is where futures broke out to the upside from a downtrend line.
Increasing prospects of the Federal Reserve pivoting to accommodation this year could boost economic growth and overall demand, which is a bullish longer term influence for copper and industrial commodities in general.
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