Written Commentary
GOLD
December gold futures advanced to above the 2500 level in anticipation of a Federal Reserve that will pivot to accommodation starting at its September policy meeting. The Federal Reserve at yesterday’s policy meeting kept its key interest rate unchanged as widely expected but hinted at an imminent interest rate decline. Federal Reserve Chair Powell said a rate cut in September could be on the table if inflation moves lower and is line with expectations.
Financial futures markets are pricing in three 25 basis point cuts in the fed funds rate later this year. There is almost a 100% probability that the FOMC 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 at the November 7 meeting is 74%, and there is a 74% chance of another 25 basis point rate cut at the December 18 meeting.
In addition, increasing geopolitical tensions in the Middle East are adding a flight to quality bid to the gold market.
SILVER
September silver futures advanced to the 29.29 level as the bullish flight to quality influence more than offset the bearish influence of a relatively weak industrial demand outlook. The bullish interest rate policy outlook came to the forefront with yesterday’s dovish Federal Open Market Committee statement and Federal Reserve Chair Powell’s press conference. In addition, silver found support from safe-haven bids in light of escalating geopolitical tensions in the Middle East.
COPPER
September copper futures advanced yesterday in light of the bullish Federal Open Market Committee statement. However, some pressure developed today as traders remain concerned about the weakening demand outlook for copper, especially from a large copper consuming country in Asia.
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