Written Commentary
SILVER
September silver futures are sharply lower and fell under the 26.60 level in light of increasing evidence of a recession in the US. Prospects of a weaker U.S. economy and lower industrial demand for silver substantially outweighed the flight to quality influence. Silver futures are likely to underperform relative to the gold market.
There are concerns that the Federal Reserve may already be too late in pivoting to accommodation to avert an economic downturn.
GOLD
December gold futures are sharply lower but held above the 2400 support level. It was just last week that futures advanced to near record highs due to increased geopolitical tensions in the Middle East.
However, pressure on prices Friday and today were linked to Friday’s weak employment numbers and disappointing corporate earnings. On Friday it was reported that nonfarm payrolls in July increased only 114,000 when up 180,000 were expected, and the unemployment rate increased to 4.3%, which compares to the anticipated 4.1%.
In light of Friday’s employment report, there has been a dramatic shift in the outlook for Federal Reserve policy. There is now an 85% probability that the Federal Open Market Committee will lower its fed funds rate by 50 basis points at its September 18 meeting, and there is a 15% chance of a 75 basis point cut in rates.
Traders cannot rule out the possibility that the Federal Reserve could convene an emergency meeting and decide to lower its fed funds rate in advance of the scheduled September 18 meeting.
COPPER
September copper futures declined below the psychological $4.00 per pound level today in light of increasing evidence of an economic slowdown and prospects of reduced industrial demand for copper. The double bottom pattern on the daily September copper futures chart at the 4.030 area was taken out today.
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