Written Commentary
GOLD
December gold futures advanced to a new record high yesterday with much of the strength due to increasing prospects of a Federal Reserve that is likely to become more accommodative. The Federal Open Market Committee is widely anticipated to reduce interest rates this week for the first time since March 2020. In fact, it now appears that the FOMC will lower its fed funds rates by 50 basis points at the September 18 policy meeting. Currently there is a 67% chance the FOMC will announce a 50 basis point cut in its fed funds rate at the conclusion of tomorrow’s meeting, which is up from 25% a month ago, and there is a 33% probability of a 25 basis point reduction.
Additional supportive influences on gold are gold’s safe-haven appeal and aggressive buying by central banks.
SILVER
December silver futures yesterday advanced to the highest level since July 17 due to increasing expectations that the Federal Reserve will opt for a more aggressive interest rate cut at this week’s policy meeting. In addition, it is likely that there will be more interest rate cuts from the FOMC this year, and a policy of easier credit conditions will probably continue well into 2025.
However, disappointing economic data from a major metals consuming country in Asia raised demand concerns.
COPPER
Yesterday December copper futures advanced to their highest level since August 27 and were able to trade above the $4.30 per pound level. Futures have been supported by increasing probabilities that the Federal Open Market Committee will deliver an outsized interest rate cut this week.
Prospects of a potentially more aggressive Federal Reserve pivot to accommodation pressured the U.S. dollar, providing an additional boost to dollar-denominated commodities.
Disappointing economic data from a top copper consuming country in Asia dampened the demand outlook for industrial commodities, including copper.
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