Written Commentary
GOLD
Gold prices advanced in light of declining U.S. Treasury yields. However, gains were limited by a higher U.S. dollar.
Traders will be closely watching the May U.S. jobs report on Friday as investors seek cues on the potential timing of a fed funds rate cut, especially after recent economic releases raised speculation that the central bank has room for reducing rates this year. Traders are currently pricing in a 67% probability of rate cut in September. Meanwhile, the Bank of Canada is anticipated to lower its key interest rate during its meeting later today, and the European Central Bank is expected to follow suit on Thursday. Also, underpinning the gold market are reports that central banks increased their gold buying in April. Net gold purchases by global central banks increased to 33 metric tons in April from a revised 3 tons in March, according to the World Gold Council.
The main trend for gold is higher.
SILVER
Silver prices fell to under the $30.00 per ounce mark, retreating from the 11-year high made earlier this month. Traders continue to assess the industrial demand for silver, since recent economic reports are suggesting the economy is slowing, which will likely limit industrial demand for silver. Potentially offsetting weakening industrial demand is the increasing probability that the Federal Reserve will pull forward a pivot to accommodation. In addition, other major central banks are on track to cut key interest rates in upcoming decisions.
The longer term supply and demand picture remains supportive, since silver is headed into its fourth consecutive year of deficit in light of tightening supplies, with stockpiles tracked by the London Bullion Market Association falling to the second-lowest level on record in April.
COPPER
Copper futures extended their downturn toward $4.50 per pound and are trading near the lowest levels since May 9. Much of the selling pressure is due to reports of lower demand in the near term. The recent decline almost fully erases May’s rally that took prices to a record high of near $5.20. In spite of this, prices are still 15% higher year-to-date due to speculative buying In light of predictions of upcoming supply shortages. Major copper miners are unlikely to ramp-up production anytime soon since they are more inclined to turn to merger and acquisition activity rather than committing capital to new mining projects.
The longer term outlook remains supportive in light of copper’s key role in electrification in grid-scale energy storage and data-center infrastructure.
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