Written Commentary
GOLD
December gold futures are lower despite a neutral July consumer price index report. The July consumer price index increased 0.2% as expected, and on an annualized basis was up 2.9% when a gain of 3.0% was anticipated. The CPI excluding food and energy in July increased 0.2% as forecast, and the CPI excluding food and energy on an annualized basis was up 3.2%, which was the median prediction.
Some of today’s selling pressure may be linked to ideas that although the Federal Reserve is on track to lower interest rates at its September 18 policy meeting, it appears more likely that the central bank will lower its key rate by 25 basis points rather than 50 basis points that was predicted last week. There is now a 59% 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 41% probability that the FOMC will reduce its key rate by 50 basis points in September.
Selling pressure is likely to be limited in light of the yellow metal’s safe-haven appeal, which has been enhanced by escalating geopolitical tensions in the Middle East.
SILVER
September silver futures are only slightly higher now after earlier today advancing to 28.175 per ounce. Prices for silver have come under pressure recently on the belief that the U.S. economy is slowing, resulting in weaker demand for industrial commodities. In fact, there is a perception that it’s not just the U.S. economy that is weakening but the global economy seems to be turning softer as well. The flight to quality influence for silver remains but is being overpowered by a weak industrial demand outlook.
COPPER
September copper futures are higher today and are able to remain above the psychological $4.00 per pound level. It was just last week that prices fell to a five-month low of $3.921. There has been some support for the red metal as markets assessed threats to supply. There were reports that Zambia closed its border with Congo, which is the world’s second-largest copper producer. However, the latest reports are that Zambia has reopened its border with Congo.
The bearish influence of a weakening global economy will probably more than offset the bullish influence of coming easier credit policies from the Federal Reserve, resulting in lower prices for copper.
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