Written Commentary
GOLD
Gold prices advanced to record highs on Friday, driven by strong demand for safe-haven assets, while traders focus on the Federal Reserve’s policy outlook. There is now a 74% probability that the Federal Open Market Committee will lower its that funds rate by 25 basis points at its September 18 meeting, and there is a 26% probability that the FOMC will reduce its key rate by 50 basis points in September.
Investors are looking ahead to Federal Reserve Chair Jerome Powell’s speech in Jackson Hole, Wyoming on Friday. Powell could greenlight a September interest rate cut at the Jackson Hole Symposium.
The Federal Open Market Committee will release the minutes from its July 31 policy meeting on Wednesday.
Futures are holding up well despite recent better than expected U.S. economic data, which reinforced the case for a less aggressive monetary policy from the Federal Reserve.
The main trend for gold is higher.
SILVER
September silver futures advanced to the 29.19 level, hitting an over two-week high. Last week September silver futures advanced above a major downtrend line that started in mid-July. Futures have put in a strong performance even though it appears that the Federal Reserve will be less aggressive when it pivots to accommodation. Recent data showed that both producer and consumer prices in the U.S. were relatively tame in July.
Underlying support remains due to expectations that the Federal Reserve will lower its fed funds rate in September, while prospects of a weakening global economy may limit demand for silver.
COPPER
September copper futures advanced to the $4.20 area today, reaching a two-week high as strike activity in Chile threatened to disrupt production of copper. Although some copper mines in Chile have come to a labor agreement, other mines have not yet reached a settlement, increasing risks of a supply shortage.
Some support for copper futures is coming from the belief that the Federal Reserve will begin lowering its fed funds rate in September. However, the upside may be limited due to worries that demand for copper from a large copper consuming country in Asia may be limited.
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