Written Commentary
SILVER
Silver prices this week fell to their lowest level since May 15. Increasing evidence of a weakening global economy is the main reason for pressure on silver in light of silver’s industrial applications. However, there is a bounce today.
Partially countering the bearish influence of a weaker global economic outlook are dovish actions from major central banks, including recent interest rate cuts from the European Central Bank and the Bank of Canada with additional rate cuts predicted this year. In addition, it is widely anticipated that the Bank of England will be lowering its key interest rate possibly at its August policy meeting.
Financial futures markets are now predicting there is a 73% probability that the FOMC will lower its fed funds rate by 25 basis points at its September 18 meeting.
The longer term supply and demand situation remains supportive, since silver is headed into its fourth consecutive year of deficit.
GOLD
Gold futures advanced above the 2350 level, after falling over 1.0% in the previous session. This week’s weaker than expected consumer price index and producer price index reports are providing underlying support, which increased the likelihood of faster U.S. interest rate cuts.
However, this bullish influence was offset by the bearish impact of Wednesday’s Federal Open Market Committee’s hawkish policy statement. Wednesday’s FOMC statement indicated the Federal Reserve may lower its fed funds rate only one time in 2024. “Dot plot” projections from FOMC members indicated that on average they expect only one interest rate reduction of 25 basis points this year, with four members predicting no cuts at all.
Despite the hawkish FOMC, analysts anticipate several major central banks will ease credit conditions this year, which remains a dominant bullish fundamental for gold prices.
The main trend for gold is higher.
COPPER
Copper futures are steady today but are not far from recent one-month lows. Recent pressure has fully erased the rally in May that took prices to a record high of near $5.20 due to evidence of reduced demand in the near term. Still, prices are 13% higher year-to-date as speculators believe looming shortages will develop.
Despite recent weakness in copper prices due to weaker near-term demand, the longer term supply and demand situation appears to be bullish for copper due to copper’s role in electrification through grid-scale energy and data-center infrastructure.
July copper futures have recently tested a downtrend line that started in mid-May. Ultimately, this downtrend line will probably be taken out on the upside.
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