Written Commentary
SILVER
March silver futures are higher, recovering from recent near four-month lows. Some of today’s gains can be linked to ideas that the Federal Reserve may cut its fed funds rate at the March policy meeting. This is a change in fundamentals since just a few days ago when the feeling was that the FOMC would not be cutting rates in March.
Some of today’s gains can be linked to ongoing geopolitical uncertainties, which drove safe-haven demand for silver. Additionally, the policy uncertainty surrounding the incoming Trump administration contributed to increased investment in safer assets.
In China, pledges from Beijing to implement “more proactive” macroeconomic policies and lower interest rates this year helped stabilize market sentiment. However, weaker-than-expected manufacturing data raised concerns over demand from the world’s largest metals consumer. The Caixin/S&P Global Manufacturing PMI fell to 50.5 in December from 51.5 in November, missing forecasts of 51.7.
GOLD
February gold futures are lower after two days of gains. Some of the strength in the overnight trade, which has been given back, was linked to ideas that the Federal Open Market Committee may be cutting interest rates at its March policy meeting.
There appears to be underlying support for gold due to expectations of additional central bank buying. A recent World Gold Council survey indicated that central banks are expected to increase their gold purchases over the next year.
In addition, there is ongoing support for gold in light of rising geopolitical risks from the ongoing Ukraine-Russia conflict and tensions in the Middle East.
COPPER
March copper futures are higher after testing the $4.00 per pound level in the overnight trade. Some of the strength can be linked to today’s pressure in the U.S. dollar. A weaker U.S. dollar makes commodities priced in dollars more attractive for holders of other currencies.
In addition., the Chinese government’s commitment to implementing “more proactive” macroeconomic policies and reducing interest rates this year helped stabilize market sentiment.
Additionally, weaker-than-expected manufacturing data from China dampened the demand outlook in the world’s largest copper consumer and limited price gains.
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