Written Commentary
SILVER
September silver futures were lower in the overnight trade, and there was additional weakness when the bearish June producer price index report was released. However, there has been a partial recovery and further recovery gains are likely.
In the long term outlook, silver is likely to be supported by expectations of a wider supply deficit in 2024.
GOLD
August gold futures fell to the 2396 area in response to the bearish U.S. June producer price index report. The producer price index for June increased 0.2% when a gain of 0.1% was expected, and on a year-to-year basis the producer price index was up 2.6%, which compares to the anticipated gain of 2.3%. The June producer price index excluding food and energy on a month-to-month basis increased 0.4% when up 0.2% was forecast, and on a year-to-year basis the producer price index excluding food and energy was up 3.0%, which compares to the estimated 2.3% increase.
The larger than expected increase in the producer price index, in theory, suggests the Federal Reserve may be slower to pivot to accommodation. However, in spite of this, financial futures markets continue to suggest the Federal Open Market Committee is on track to lower interest rates at its September 18th policy meeting. In fact, contrary to what would normally be a bearish response in the financial futures markets, there actually has been an increase in the probability of a September rate reduction from the FOMC.
In addition, gold futures have partially recovered from the morning pressure that was inspired by the bearish producer price index report, and it is likely that that there will be a further recovery in prices.
COPPER
Disappointing import figures from a top consumer in Asia indicated weak demand. Also, London Metal Exchange data showed copper inventories increased to 206,778 tons this week, which was the highest since October 2021.
September copper futures fell under $4.50 per pound in the overnight trade, which was the lowest level in six days. However, copper prices have recovered and are now higher on the day despite the bearish U.S. June producer price index report. This is an indication that there may be additional follow-through gains for copper prices today.
Increasing prospects of the Federal Reserve pivoting to accommodation this year could boost economic growth and overall demand, which is a bullish influence for commodities.
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