Written Commentary
GOLD
December gold futures are lower today in response to recovery gains in the U.S. dollar. Traders are looking forward to new indications on the scale of the Federal Reserve’s imminent interest rate cuts.
Traders are currently pricing in a 66% probability that the Federal Open Market Committee will lower its funds rate by 25 basis points at its September 18 meeting, and there is a 34% probability that the FOMC will reduce its key interest rate by 50 basis points in September. Financial futures markets are factoring in a total of 100 basis points in rate cuts for the remainder of 2024, which will reduce the opportunity cost of holding non-interest-bearing assets such as gold.
Upcoming economic reports this week are the PCE index, which is the Federal Reserve’s preferred inflation gauge, and the second estimate of the second quarter gross domestic product.
In light of elevated tensions in the Middle East, gold’s safe haven appeal remains a supportive factor.
SILVER
Today’s advance in the U.S. dollar appear to be the dominant influence putting pressure on silver futures today. The December silver futures contract is now trading under the $30 per ounce level, retreating from the recent six-week highs.
An imminent Federal Reserve policy shift to accommodation remains a supportive factor as does a safe-haven flow of funds into silver in light of escalating tensions in the Middle East.
However, countering the bullish interest rate influence and flight to quality moves are prospects of a weakening global economy that may limit industrial demand for silver.
COPPER
After yesterday advancing to six-week highs December copper futures are under pressure today with much of the selling due to recovery gains in the U.S. dollar. Today’s selling can also be linked to worries over waning industrial demand.
The labor situation at copper mines in Chile remains in focus. Approximately 300 workers at a large copper mine in Chile returned to work after agreeing to a new wage proposal over the weekend. However, several other mines in Chile have not yet finalized wage discussions, which poses a risk to approximately 4.0% of global copper supplies.
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