Written Commentary
COPPER
September copper futures retreated slightly today from a one-month high that was made on Friday. Prices were lower in the overnight trade but held the $4.59 per pound level and are now steady. Futures have held up very well in July despite indications of weak demand from a major consumer of the metal in Asia. Copper prices advanced almost 7.0% last week for the best weekly performance since the middle of May as on balance weak U.S. economic reports increased the probabilities that the Federal Reserve will begin reducing interest rates in September.
September copper futures are looking better technically, now that September copper futures on the daily chart advanced above a major downtrend line that started in mid-May.
SILVER
September silver futures fell to the $31.12 level on Monday, pulling back from a one-month high that was registered on Friday. Last week, silver prices advanced over 7.0% as weak U.S. economic data increased the probability that the Federal Reserve will start lowering interest rates in September. Traders are looking ahead to key U.S. inflation reports this week, as well as Fed Chair Powell’s testimony before congressional committees Tuesday and Wednesday to gain insights on the Federal Reserve’s monetary policy path.
There are increasing expectations of stronger demand for silver in renewable energy expansion.
The fundamentals and technical aspects are improving, which suggests higher prices for silver futures.
GOLD
August gold futures fell to the $2376 area on Monday after advancing over 1.0% on Friday. Despite today’s decline, futures remain close to six-week highs, driven by increased expectations of interest rate cuts by the Federal Reserve following relatively weak U.S. economic data. Friday’s data indicated a weakening U.S. labor market, with the unemployment rate rising to a two-and-a-half-year high and wage growth falling to a three-year low. The nonfarm payrolls headline number was higher than predicted but the previous two months were revised substantially lower.
Financial futures markets are currently pricing in a 74% probability that the Federal Reserve will lower its key interest rate in September, and a second rate cut by the end of the year. Traders are now focusing on Fed Chair Powell’s semiannual testimony to Congress on Tuesday and Wednesday and the consumer price index and producer price index reports scheduled for this week. Escalating geopolitical tensions in the Middle East continued to increase safe-haven demand for bullion.
The long term fundamentals for gold are bullish on balance.
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