SILVER
March silver futures advanced to the $31.555 per ounce on Tuesday, reaching a one-week high, following dovish remarks from a Federal Reserve official that fueled speculation about an interest rate reduction this month.
Silver, along with other precious metals, also gained support from ongoing geopolitical tensions in the Middle East, as the Israeli military struck multiple Hezbollah positions across Lebanon on Monday.
Also, markets are speculating that China may announce further stimulus measures during key political meetings this month, boosting demand expectations in the world’s largest consumer of metals.
COPPER
March copper futures advanced to the 4.2610 per pound level on Tuesday, driven by expectations that Beijing may introduce additional stimulus measures during important political meetings this month. The Chinese government did not provide the usual summary of its November meeting, resulting in speculation that more stimulus could be on the way as the world’s second-largest economy addresses increasing uncertainties.
Some of today’s strength in copper can be linked to recent data that revealed that Chinese manufacturing activity grew for the second consecutive month in November, which boosted the outlook for copper demand.
GOLD
February gold futures traded higher on Tuesday with much of the strength linked to the lower U.S. dollar. On Monday, Federal Reserve Governor Christopher Waller expressed support for another interest rate cut later this month, while New York Federal Reserve Bank President John Williams indicated a gradual shift toward a more neutral policy stance. These remarks led investors to significantly increase expectations for a 25 basis point rate reduction at the Fed’s December 18 policy meeting, with markets currently pricing in a 73% probability of this move. There is a 27% likelihood that the central bank will keep its fed funds rate unchanged. A rate cut would lower the opportunity cost of holding non-interest-bearing gold, increasing its attractiveness.
In addition, as geopolitical tensions remain, there is underlying flight to quality support for gold.
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