Written Commentary
GOLD
February gold futures are lower today after on Friday advancing to the highest level since October 31. Prices are under pressure despite continuing declines in the U.S. dollar. However, some underlying support remains due to the belief that the Federal Reserve remains on track to ease credit conditions further this year.
It now looks as though the Federal Open Market Committee will cut its key rate at its May 7 policy meeting, which supports the outlook for non-interest-bearing assets like gold.
Additionally, inflationary concerns related to U.S. trade policy have softened, as President Donald Trump toned down his stance on tariffs against China, and his administration reached a deal with Colombia to resolve tariff threats.
In the longer term view, the precious metal remains supported by expectations of continued central bank buying.
SILVER
March silver futures are lower but are trading within a narrow range since reaching a one-month high on January 16. The metal’s movement was influenced by the U.S. Federal Reserve’s expected stance on monetary policy, with optimism surrounding looser policies counterbalanced by concerns about weaker industrial demand for silver.
Risks related to inflation from rising import costs were reduced when President Donald Trump softened his rhetoric on tariffs against China. However, China’s manufacturing sector unexpectedly contracted at the start of the year. Also, overcapacity in China’s solar panel industry led photovoltaic companies to join a government self-regulation program, which is likely to limit the outlook for silver demand.
COPPER
March copper futures are lower, extending losses from the previous session despite the bullish influence of a weaker U.S. dollar. The downturn was also fueled by disappointing economic data, including an unexpected contraction in manufacturing activity in China, which is a key copper consumer, and a sharp slowdown in the country’s services sector growth. Additionally, caution was heightened ahead of China’s week-long Lunar New Year holiday.
Freeport-McMoRan, which is a major copper producer, reported missing its fourth-quarter production targets and warned of a significant drop in output for the first quarter.
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