Written Commentary
COPPER
September copper futures were higher in the overnight trade, trading just above the 4.60 level before renewed selling pressure developed. Futures are now holding above at the 4.53 level. Some of the recent price weakness can be linked to disappointing economic numbers from a top consumer In Asia.
Copper prices also came under pressure from a higher U.S. dollar, which gained on safe-haven bids. Also, London Metal Exchange data showed copper inventories increased to 206,778 tons last week, which was the highest level since October 2021.
Increasing prospects of the Federal Reserve pivoting to accommodation this year could boost economic growth and overall demand, which is a bullish longer term influence for copper and industrial commodities in general.
SILVER
September silver futures were marginally higher in the overnight trade but are now lower on ideas that demand for industrial commodities may be lower in light of evidence that the global economy is weakening. There are reports of mixed economic data coming from a large consumer of the metal in Asia.
However, limiting the pressure on silver are expectations of a wider supply deficit in 2024, which is likely to be the fifth consecutive year of a shortfall.
GOLD
There was some flight to quality buying in the overnight session. August gold futures tested the 2426 level before falling back to unchanged. Also, a firming U.S. dollar tended to limit gains. There was little reaction to the slightly weaker than expected July Empire State manufacturing index.
The more dominant underlying fundamental is the increasing prospect that the Federal Reserve will pull forward a pivot to accommodation. Financial futures markets are predicting there is a 96% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting. In addition, the probability of an additional rate reduction from the FOMC has now been moved forward to the November 7 meeting where there is a 61% chance of another 25 basis point cut in the fed funds rate.
Traders are looking ahead to 11:00 central time today when Federal Reserve Chair Powell will participate in a conversation hosted by the Economic Club of Washington. Most likely, any surprises from Powell will probably be on the dovish side.
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