Written Commentary
CURRENCY FUTURES
The U.S. dollar index is higher.
Producer prices in Germany declined by 3.3% year-on-year in April 2024, which compares to market predictions of a 3.2% decline. This marked the tenth consecutive month of producer price deflation.
The European Central Bank appears to be on track to lower its key interest rate in June.
Australian consumer sentiment deteriorated further in May, according to a private survey. The Westpac-Melbourne Institute consumer sentiment index declined 0.3% to 82.2 in early May, extending a 2.4% drop in April.
Today’s release of the minutes of the Reserve Bank of Australia’s May 7 policy meeting showed policymakers considered whether to raise rates, although the RBA decided to keep its cash rate unchanged at 4.35%.
STOCK INDEX FUTURES
Stock index futures are mixed today as the major stock indexes remain near record highs.
There are no major economic reports scheduled for today.
The fundamentals and technicals remain supportive.
INTEREST RATE MARKET FUTURES
Recent economic data showed signs of a cooling U.S. economy, but inflation remains a concern, and comments from several policymakers indicate a higher-for-longer policy.
Federal Reserve speakers today are Thomas Barkin at 8:00, Christopher Waller at 8:00, John Williams at 9:05, Raphael Bostic at 8:10, Michael Barr at 10:45 and Raphael Bostic at 6:00 PM.
Financial futures markets are predicting there is a 63% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting.
The fundamentals and technicals have improved for futures, especially at the long end of the yield curve.
GOLD
Gold futures declined today after hitting a new record high yesterday as investors assessed recent remarks from Federal Reserve officials. In spite of last week’s cooling U.S. consumer inflation data, Fed officials are not currently prepared to say inflation is moving towards the central bank’s target level, with several policymakers advocating for continued caution on policy. Safe-haven demand continues to support the metal in light of fears of a potential escalation of geopolitical tensions in the Middle East. In addition, substantial buying of gold by central banks has underpinned the gold market.
Higher prices for gold are likely.
SILVER
On Monday silver prices advanced to the highest level since December 2012, as investors reassessed the Federal Reserve’s monetary policy outlook following recent comments by Federal Reserve officials. Federal Reserve Vice Chair Michael Barr stressed the need for more time to evaluate restrictive monetary policy effectiveness, while Atlanta Fed President Raphael Bostic reiterated his prediction for only one interest rate reduction this year. While high interest rates limited the appeal of non-interest bearing assets, the white metal remains supported by its industrial applications. Silver is headed into its fourth consecutive year of deficit due to tightening supplies, with stockpiles falling to the second-lowest level on record in April. Higher prices for silver are likely.
COPPER
Copper futures advanced to record highs on Monday as strong demand expectations and a tight supply situation intensified worries about potential shortages. The fundamentals remain supportive in light of expectations for increasing consumption due to silver’s key role in electrification, from grid-scale energy storage to data-center infrastructure. On the supply side, hopes of added mine output are limited, as high costs of committing to new mining projects drove large miners to mergers and acquisitions instead of new projects.
The main trend is higher for copper.
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