Written Commentary
SILVER
September silver futures are lower today as the bearish influence of a relatively weak global demand outlook is dominating. Silver appears to be on track to decline for the third consecutive week. Persistent demand concerns remain in top consuming country in Asia. In addition, some analysts believe expectations that silver demand from the renewable energy sector have been overstated.
There was only limited support for silver prices yesterday when the larger than expected increase in the second quarter U.S. gross domestic product was reported. However, prospects of an aggressive Federal Reserve pivot to accommodation later this year will limit pressure on silver.
GOLD
August gold futures advanced to above the 2382 level after the U.S. June personal income report was released, which was slightly bullish on balance for gold prices. Personal income in June on a month-to-month basis increased 0.2% when a gain of 0.4% was expected, and the core PCE price index on a month-to-month basis increased 0.2% when up 0.1% was anticipated.
Futures are being supported by increasing prospects of a Federal Reserve that will more aggressively pivot to accommodation later this year. Although there is a 93% 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 later this year.
There is almost a 100% 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 67%, and there is a 63% chance of another 25 basis point rate cut at the December 18 meeting.
Gold futures are likely to continue to gain on silver.
COPPER
Yesterday September copper futures declined to the lowest level since March 27 and are on track for the third week of declining prices. Much of the weakness is linked to demand concerns from a top copper consuming country in Asia. There was only limited support yesterday when the larger than expected increase in the U.S. second quarter gross domestic product report was released.
The bulls on this market remain encouraged by the belief that copper prices may find support from improving sentiment in India after the government recently said it will continue spending on infrastructure projects. In addition, there is some support on ideas 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.
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