Written Commentary
SILVER
September silver futures advanced to the $31.310 per ounce level in light of today’s U.S. employment numbers, which suggest a more accommodative Federal Reserve is likely. From a technical point of view, on the daily chart September silver futures extended the up move after Wednesday’s chart breakout above a major downtrend line.
In addition, there is improved sentiment due to expectations of stronger demand for the metal in renewable energy expansion.
The fundamentals and technical aspects are improving.
GOLD
August gold futures advanced to near the $2395 per ounce level after the U.S. June employment report was released. These on-balance softer than expected employment numbers could prompt the Federal Open Market Committee to pivot to accommodation sooner rather than later. Nonfarm payrolls in June increased 206,000 when a gain of 189,000 was expected. However, the previous month was revised to show a substantially smaller increase. Private payrolls increased 136,000, which compares to the anticipated gain of 160,000, and the unemployment rate was 4.1% when 4.0% was forecast.
Also supporting futures earlier this week was a surprise contraction in services activity and disappointing private employment numbers in the U.S., which supports a dovish Fed policy outlook. Financial futures markets are now predicting there is a 76% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis point at its September 18 meeting. In addition, it is likely that the FOMC will lower its key rate one more time before the end of this year, which remains an overriding bullish influence on precious metals. In addition, underlying flight to quality support for gold remains in light of elevated tensions in the Middle East.
From a technical point of view, the August gold futures on the daily chart broke out above a downtrend line on Wednesday with follow-through gains today.
The long term fundamentals for gold are bullish on balance.
COPPER
September copper futures broke out above a major downtrend line on Wednesday with substantial follow- through gains today. The $4.700 level is now being tested, and the metal is on track to advance more than 5.0% this week for its best weekly performance since mid-May.
Much of the strength is linked to increasing probabilities that the Federal Open Market Committee will become more accommodative this year than previously thought. In addition, the bullish influence of a weaker U.S. dollar has supported metals prices.
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