Written Commentary
GOLD
August gold futures were higher in the overnight trade and approached the $2350 per ounce level. Some of the strength can be linked to a lower U.S. dollar. However, as the greenback mounted a partial recovery this morning, gold futures came under pressure and are currently lower on the day.
Traders continue to assess the recent U.S. inflation reports. Last Friday, the Federal Reserve’s preferred gauge of underlying inflation slowed to its lowest annual rate since 2021, increasing hopes that the Federal Open Market Committee will lower its fed funds rate two times this year. The probability of the Federal Open Market Committee cutting its fed funds rate at its September 18 meeting is 66%. In addition, there are expectations of lower interest rates from other major central banks.
Investors’ attention will now focus on Wednesdays release of the Federal Open Market Committee’s release of the minutes from the June 12 policy meeting and the U.S. employment report on Friday in an effort to seek clarity on the timing of possible interest rate cuts.
SILVER
September silver futures were higher in the overnight trade and approached the $29.65 per ounce level. However, these gains have been given back as futures are now unchanged on the day. Traders continue to assess the outlook for Federal Reserve monetary policy in light of signs of cooling U.S. inflation. On Friday, PCE prices, which is the Fed’s preferred inflation gauge, continued to slow toward the central bank’s target of 2.0% in May.
Underlying support remains due to the belief that the Federal Open Market Committee will pivot to accommodation this year. In addition, analysts anticipate several other major central banks will become more accommodative this year, and some already have.
COPPER
September copper futures were lower in the overnight trade but held to just above the $4.35 per pound level. However, there has been a recovery, and futures are currently higher. Price pressures last month can be attributed to ample supplies, which have outweighed expectations of stronger physical demand from Asia. Copper production in Chile increased 8.0% year-on-year to 444,000 tons in May.
Last week September copper futures traded at the lowest level since April 16, pressured by a rallying U.S. dollar and firming U.S. Treasury yields. Recent hawkish commentary from several Federal Reserve officials has also undermined prices.
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