Written Commentary
SILVER
July silver prices fell to the $29.37 area, retreating from the 11-year high that was registered last month. Silver prices followed weakness in the gold market and there was additional selling when the U.S. employment report was released.
Much of the strength in silver prices earlier this week was linked to interest rate cuts from the Bank of Canada and the European Central Bank. Despite today’s employment numbers the Federal Reserve still appears to be on track to lower its fed funds rate at its September 18 policy meeting.
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
August gold futures fell to the 2322 area after yesterday advancing to two-week highs. Strength in the gold market earlier this week can be attributed to a series of economic reports that increased expectations that the Federal Reserve may lower interest rates one or two times this year.
However, sharply lower prices today are due to news that a large central bank in Asia ended an 18-month period of gold buying. In addition, there was followed-through selling when the stronger than expected U.S. employment report indicated the Federal Open Market Committee may be slower to pivot to accommodation. Nonfarm payrolls in May increased 272,000 when a gain of 182,000 was expected. Private payrolls were up 229,000 when a gain of 168,000 was estimated, and average hourly earnings were up 0.4% against the estimated increase of 0.3%. The unemployment rate increased to 4.0% when 3.9% was anticipated.
A partial recovery is likely today.
The main trend for gold is higher.
COPPER
July copper futures extended their downturn toward the $4.50 per pound level, which is the lowest price since May 9. This decline almost fully erased May’s rally that took prices to a record high of near $5.20 in light of evidence of low demand in the near term. LME stocks in Asia continued to build, beating seasonal factors that have a tendency to favor an inventory drawdown.
There are predictions of upcoming supply shortages since major copper miners are unlikely to ramp-up production anytime soon and are more inclined to turn to merger and acquisition activity rather than committing capital to new mining projects.
The longer term outlook remains supportive in light of copper’s key role in electrification in grid-scale energy storage and data-center infrastructure.
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