Written Commentary
COPPER
September copper futures are higher today after last week’s breakout above a major downtrend line that started in mid-May. Recent gains can be linked to indications of improving physical demand from a top consumer in Asia.
Softening U.S. economic data increased probabilities that the Federal Reserve will lower interest rates, supporting the outlook for commodity prices.
GOLD
August gold futures advanced to above the 2388 level on Wednesday, extending gains from the previous session due to increasing speculation that the Federal Reserve will pivot to accommodation this year.
Yesterday Federal Reserve Chair Jerome Powell delivered his semiannual testimony before the House Financial Services Committee. Powell reiterated the central bank’s cautious approach on monetary policy. He said the Fed needs more evidence that inflation is moving sustainably toward its 2.0% target before lowering interest rates. However, he warned that maintaining a restrictive policy for too long could weaken economic activity and employment.
Powell will testify before the Senate Banking Committee today at 9:00 central time. His testimony will be essentially the same is what he delivered to the House Financial Services Committee.
Investors are also looking forward to upcoming inflation reports to be released on Thursday and Friday. The June consumer price index and June producer price index reports are both expected to show 0.1% increases.
Traders continue to monitor geopolitical developments in the Middle East.
SILVER
September silver futures advanced to the $31.38 per ounce level today and remain in a four-day symmetrical triangle pattern. The technical rule of thumb is that futures 60% to 65% of the time break out of a congestion pattern in the same direction that they came into the pattern.
Silver prices are also being underpinned by prospects of lower interest rates from the Federal Reserve this year. Financial futures markets are predicting there is a 77% probability that the Federal Open Market Committee will lower its key interest rate at its September 18th meeting. In addition, a second reduction is almost fully priced in for December.
From a fundamental point of view, analysts believe silver could trend higher due to expectations of a wider supply deficit in 2024 after three consecutive years of shortfalls.
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