Written Commentary
GOLD
August gold futures advanced to near 2360 per ounce on Thursday, hovering near two-week highs, as evidence of a weakening U.S. economy heightened expectations that the Federal Open Market Committee might reduce interest rates this year. Prices are higher despite strength in the U.S. dollar.
Underlying support for futures is coming from increasing evidence that the Federal Open Market Committee will be lowering its key interest rate in September. Today it was reported that housing starts in May were 1.277 million when 1.373 million were anticipated, and permits were 1.386 million when 1.450 million were estimated. Tuesday’s data showed that U.S. retail sales barely Increased, signaling softening consumer sentiment.
SILVER
Silver prices climbed above $30.50 per ounce, hitting the highest level in almost two weeks as weaker-than-expected U.S. economic data bolstered the belief that the Federal Reserve will cut interest rates twice this year. The European Central Bank and the Bank of Canada already started their easing cycle this month, while the Swiss National Bank lowered its key interest rate today, and while the Bank of England at its policy meeting today kept rates unchanged, there is growing speculation that the BOE will lower interest rates at its August meeting. The bullish influence of central banks becoming more accommodative appears to be offsetting the bearish influence of slowing industrial demand for metals.
Financial futures markets are now predicting there is a 66% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting.
COPPER
July copper futures advanced to near $4.57 per pound today after futures on Tuesday fell to their lowest level since April 18. Today the focus of attention is on prospects of central bank accommodation, which is more than offsetting the bearish influence of recent weaker industrial demand from the world’s top consumers. In addition, there is support for futures due to reports of operational setbacks for a large copper mine in Chile that is reducing output.
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