Written Commentary
SILVER
July silver futures quickly advanced to near the $30.36 per ounce level when the bullish May consumer price index report was released. Traders will now be looking ahead to this afternoon’s Federal Open Market Committee statement and Fed Chair Powell’s press conference.
In light of today’s consumer price index report financial futures markets are now predicting there is a 69% probability that the FOMC will lower its fed funds rate by 25 basis points at its September 18 meeting. Prior to today’s CPI number the probability of a September rate cut was at 50%.
The longer term supply and demand situation remains supportive, since silver is headed into its fourth consecutive year of deficit in light of tightening supplies.
GOLD
Gold prices quickly advanced when the bullish U.S. May consumer price index report was released. The CPI was unchanged when an increase of 0.1% was expected, and on an annualized basis the CPI was up 3.3% when up 3.4% was estimated. Also, the CPI excluding food and energy on a month-to-month basis was up 0.2% when an increase of 0.3% was forecast, and the CPI excluding food and energy on an annualized basis was up 3.4% when an increase of 3.5% was estimated.
The Federal Open Market Committee concludes its two-meeting today. A statement will be released at 1:00 central time and Fed Chair Powell will hold a press conference at 1:30. The Fed is expected to keep interest rates steady, but investors will scrutinize the “dot plot” to gauge the projected number of interest rate cuts for the year.
There was some recent support for gold due to a survey conducted by the Official Monetary and Financial Institutions Forum, which showed that central banks planned to continue to increase their exposure to gold in the next 12-24 months.
The main trend for gold is higher.
COPPER
Copper futures followed other metal prices higher in response to the bullish consumer price index report with July copper futures advancing to above the $4.61 per pound level. Today’s price advance takes the July copper contract to near a four-week downtrend line, which I think will ultimately be taken out to the upside.
Traders will now be looking ahead to this afternoon’s Federal Open Market Committee statement and Fed Chair Powell’s press conference.
Copper’s role in electrification through grid-scale energy and data-center infrastructure remains a supportive long term fundamental. This is being magnified by the difficulty of starting new projects for fresh ore supplies
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