Written Commentary
GOLD
August gold futures declined to near the 2334 level as investors await this week’s U.S. economic reports for clarity on the Federal Reserve’s timeline for interest rate cuts, which include the core PCE index, the Fed’s preferred inflation measure, consumer spending and income, and the third estimate for first quarter gross domestic product growth.
In addition, some of the pressure can be linked to hawkish comments from Federal Reserve officials. Yesterday San Francisco Federal Reserve Bank President Mary Daly said she does not think the U.S. central bank should lower rates until policymakers are confident that inflation is moving towards it’s 2.0% target.
Also, some of the recent pressure on gold is due to a stronger U.S. dollar.
Analysts anticipate several major central banks will become more accommodative this year, and some already have, which remains a bullish long term fundamental for gold prices.
SILVER
September silver futures were a little higher and were able to advance above the $30 per ounce level. Gains are being limited by hawkish comments from Federal Reserve officials. However, these comments from Federal Reserve officials are being offset by dovish developments for other major central banks, which limited price declines. Recently the European Central Bank and the Bank of Canada began their rate-cutting cycles, while the Swiss National Bank also lowered interest rates. Meanwhile, the Bank of England is expected to lower borrowing rates possibly in August.
Despite hawkish rhetoric from Federal Reserve officials, financial futures markets are now predicting there is a 68% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting, and a second rate cut is anticipated before the end of this year.
COPPER
September copper futures were lower in the overnight trade and are trading near the $4.38 per pound level, which is near the lowest in over two months in light of mounting evidence of weaker demand from the world’s top consumers.
Last Thursday futures broke out above a one-month downtrend line on the daily chart. However, that breakout proved to be a false breakout now that prices have rolled under that trendline.
Underpinning the market for the long term are prospects of central bank accommodation.
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