Written Commentary
GOLD
December gold futures are higher despite this morning’s economic reports, which were neutral. The August producer price index increased 0.2% as expected, and the producer price index on a year-to-year basis was up 1.7% when an increase of 1.8% was anticipated. The August producer price index excluding food and energy was up 0.3% when up 0.2% was forecast, and on an annualized basis the producer price index excluding food and energy increased 2.4% when a gain of 2.5% was estimated. Jobless claims in the week ended September 7 were 230,000 as expected.
Underlying support remains due to prospects of a Federal Reserve that is likely to pivot to accommodation. However, in the last week the probability of an aggressive pivot to easier credit conditions from the Fed have diminished. Currently there is an 87% 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 13% probability that the FOMC will reduce its key interest rate by 50 basis points in September.
Gold futures have recently performed better than the news would suggest, which should be viewed as a sign of strength.
SILVER
December silver futures are higher due to hopes of increased industrial demand in light of ongoing prospects of the Federal Open Market Committee pivoting to a series of interest rate cuts starting at the September 18 policy meeting.
There was some support for metals after the European Central Bank at its policy meeting today lowered its key interest rates by 25 basis points.
COPPER
December copper futures advanced above a six-day congestion pattern, although the $4.240 resistance is holding.
There are some indications of improving demand, including declining copper inventories in Shanghai Futures Exchange warehouses in recent weeks, which reverse increases that were seen in July. Copper futures also benefited from a broadly based rebound in risk assets, including global stock markets and commodities. Today’s gains in metals are taking place despite a Federal Reserve that is likely to less aggressively pivot to accommodative policies this year.
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