Written Commentary
GOLD
August gold futures quickly advanced to above the 2415 level after the bullish U.S. June consumer price index report was released. The consumer price index declined 0.1% when a 0.1% increase was expected, and the consumer price index excluding food and energy increased 0.1% when up 0.2% was anticipated. This report puts additional pressure on the Federal Reserve to reduce its key interest rate sooner rather than later.
Currently there is an 87% probability that the Federal Open Market Committee will cut its key interest rate by 25 basis points at its September 18th policy meeting. In addition, there is an increasing chance that the FOMC will lower interest rates a second time before the end of the year.
The long term fundamentals for gold are bullish on balance.
SILVER
September silver futures advanced to above the 32.00 level, breaking out from a four-day symmetrical triangle pattern in response to the bullish June U.S. consumer price index report. Today’s breakout to the upside is consistent with historical probabilities that 60% to 65% of the time prices break out of a congestion pattern in the same direction that they came into the pattern.
In addition to the bullish interest rate influence, expectations of a wider supply deficit are underpinning silver prices.
The fundamentals and technical aspects are improving, which suggests higher prices for silver futures.
COPPER
September copper futures declined to just above the 4.51 level due to demand uncertainties from a large consumer in Asia. In addition, increasing inventories weighed on market sentiment. London Metal Exchange data indicated copper inventories increased 4,450 tons to 195,475 tons, which is the highest level since October 2021.
Pressure on copper prices was limited due to the belief that the Federal Open Market Committee will lower its key interest rates sooner rather than later, especially in light of today’s consumer price index report that showed a small decline when a slight increase was forecast. Lower U.S. interest rates could boost economic growth and overall demand, which is a bullish supporting influence for commodities.
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