Written Commentary
COPPER
Copper futures advanced yesterday after the consumer price index report was released. And as was the case with other metals, tended to give back some of these gains in light of the hawkish Federal Open Market Committee statement.
Futures remain lower on the day today but were able to bounce from overnight lows in response to the bullish producer price index report.
Despite recent weakness in copper prices due to weaker near-term demand, the longer term supply and demand situation appears to be bullish for copper due to copper’s role in electrification through grid-scale energy and data-center infrastructure.
SILVER
Silver prices advanced yesterday after the bullish consumer price index report was released. However, just like the gold market, some of the gains were given back in light of the hawkish Federal Open Market Committee statement. In the overnight trade silver futures declined to their lowest level since May 15. Futures remain lower today but are substantially above the overnight lows due to the bullish May producer price index report.
In light of today’s producer price index report, financial futures markets are now predicting there is a 70% probability that the FOMC will lower its fed funds rate by 25 basis points at its September 18 meeting. Prior to today’s PPI number the probability of a September rate cut was at 63%.
The longer term supply and demand situation remains supportive, since silver is headed into its fourth consecutive year of deficit.
GOLD
Gold prices quickly increased yesterday after the bullish May consumer price index report was released. However, some of the gains were given back when the Federal Open Market Committee statement was released, indicating the Federal Reserve may lower its fed funds rate only one time in 2024. “Dot plot” projections from FOMC members indicated that on average they expect only one interest rate reduction of 25 basis points this year, with four members predicting no cuts at all.
There was follow-through weakness today, although there was some recovery when the bullish May producer price index report was released, which puts pressure on the Federal Reserve to lower interest rates sooner rather than later. The PPI declined 0.2% when an increase of 0.1% was expected.
Despite the hawkish FOMC yesterday, analysts anticipate many major central banks will ease credit conditions this year, which remains a dominant bullish fundamental for gold prices.
The main trend for gold is higher.
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