Written Commentary
COPPER
September copper futures are lower, falling to the lowest level since March 27 and are getting closer to the psychological support of $4.00 per pound. There are increasing demand concerns as a large copper consuming country in Asia appears to be cutting back on purchases. In addition, threats of trade barriers from the U.S. and Europe added to the bearish sentiment.
GOLD
August gold futures are higher and are approaching the 2392 level, as traders look ahead to upcoming policy meetings from major central banks this week. The Federal Reserve is anticipated to keep interest rates unchanged at the conclusion of its two-day policy meeting tomorrow. However, tomorrow’s statement may contain hints that the Federal Open Market Committee is on track to lower its fed funds rate at its September meeting. There is a 96% 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.
However, 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 66%, and there is a 62% chance of another 25 basis point rate cut at the December 18 meeting.
August gold futures are higher today and are testing a steep downtrend line that started on July 17. Some of the strength in gold can be attributed to flight to quality buying in light of ramped-up geopolitical tensions in the Middle East.
SILVER
September silver futures are higher and are now near 28.20 per ounce. Although prices are higher today, futures remain not far from 12-week lows as investors prepare for the latest monetary policy decisions from several major central banks this week. The Federal Reserve is widely expected to hold interest rates steady this week before easing in September. On the other hand, there is speculation that the Bank of Japan could hike its key interest rate on Wednesday to defend the yen. Analysts remain divided on whether the Bank of England will start cutting Interest rates this week.
There appears to be faltering demand from a top copper consuming country in Asia, which will likely limit the near term upside for silver prices.
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