Written Commentary
GOLD
December gold futures declined when the July personal income report was released due to its bearish interest rate implications. Personal income in July increased 0.3% when up 0.2% was expected, and personal consumption expenditures in July increased 0.5% as forecast. This caused traders to slightly scale back expectations of just how aggressively the Federal Reserve is likely to pivot to accommodation this year.
There is now a 70% chance that the Federal Open Market Committee will lower its that funds rate by 25 basis points at its September 18 policy meeting, and there is a 30% probability that the Federal Reserve will lower its key rate by 50 basis points. Despite this, markets continue to anticipate approximately 100 basis points in rate cuts over the Fed’s three remaining policy meetings this year.
Selling is being limited by the bullish safe-haven appeal of gold in light of escalating tensions in the Middle East.
SILVER
December silver futures are lower this morning after in the overnight trade hitting the $30 per ounce level. Currently there are two offsetting dominant fundamentals. On the bullish side is the Federal Reserve that is anticipated to pivot to accommodation starting with its September policy meeting. On the bearish side are prospects of a weakening global economy that may limit industrial demand for silver.
COPPER
December copper futures are steady on Friday showing little response to the July personal income report. After hitting six-week highs on Tuesday, prices have pulled back. The weak demand outlook appears to be the dominant bearish fundamental. However, the potential for reduced supplies in light of an uncertain labor situation at Chilean copper mines is tending to limit the selling pressure on copper. Prospects of lower interest rates from the Federal Reserve are also lending some support.
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