Written Commentary
SILVER
September silver futures are lower, falling to the 27.475 level per ounce today. Silver futures are only slightly above the three-month lows that were made at mid-week. Much of the selling this week was linked to the liquidation of bullion assets to cover margin calls in light of lower equity prices.
The dominant bearish influence is a weakening global economy, which is dampening demand for industrial commodities, including silver. Economic reports last week showed the U.S. economy added fewer jobs in July than predicted, which caused traders to believe the Federal Reserve may be behind the curve and already may be too slow in averting an economic downturn. Some of these fears were alleviated with yesterday’s jobless claims report coming in slightly less than median forecasts.
GOLD
August gold futures advanced to near the 2472 level on Friday after increasing almost 2.0% in the previous session. Gold continues to be supported by ongoing geopolitical risks and expectations of a Federal Reserve pivot to accommodation at its September policy meeting. Currently there is a 54% probability that the Fed will lower its fed funds rates by 50 basis points at its September 18 meeting and a 46% probability of a 25 basis point reduction in its key interest rate. The probability of a 50 basis point rate cut has recently diminished in light of Thursday’s jobless claims report, which showed fewer claims than analysts had expected. Additional interest rate cuts are anticipated at subsequent meetings this year.
The yellow metal’s safe-haven appeal has been enhanced by escalating geopolitical tensions in the Middle East.
COPPER
September copper futures are higher and now are above the psychological $4.00 per pound level after earlier this week falling to the lowest level since March 7. The copper market has not been immune to the risk aversion that was triggered recently by selling pressure in a wide range of financial assets and commodities due to increasing concerns of a global economic slowdown. Demand for base metals, including copper, is likely to be limited by a major copper consuming country in Asia.
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