Silver Lower on Weak Industrial Outlook

GOLD

Gold futures were slightly lower in the overnight trade, pressured by a stronger U.S. dollar and lower central bank demand in Asia. In addition, hawkish comments from Federal Reserve officials pressured prices countering the bullish influence of recent softer-than-expected consumer price index and producer price index reports in the U.S. Philadelphia Federal Reserve Bank President Patrick Harker on Monday said the U.S. Federal Reserve would be able to cut its benchmark interest rate once this year if economic forecasts play out.

On Sunday Minneapolis Federal Reserve Bank President Neel Kashkari reaffirmed his view that it was a “reasonable prediction” to expect a single rate cut this year.

Despite the hawkish FOMC, analysts anticipate several major central banks will become more accommodative this year, which remains a bullish long term fundamental for gold prices.

SILVER

Silver prices are lower today as a weaker industrial outlook offset support from a dovish turn by some major central banks. The European Central Bank and the Bank of Canada recently lowered their key interest rates, and the Bank of England will likely reduce its key interest rate at its August meeting.

Financial futures markets are now predicting there is a 65% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points at its September 18 meeting. In addition, financial futures markets are predicting another interest rate reduction from the Fed later this year.

The longer term supply and demand situation remains supportive, since silver is headed into its fourth consecutive year of deficit.

COPPER

Copper futures fell further to below $4.40 per pound, which is the lowest in two months and more than erasing May’s rally that took prices to a record high of near $5.20 a pound. Recent pressure on prices is due to low demand in the near term. Still, prices are 10% higher year-to-date due to speculative bets of looming shortages. Copper’s role in electrification through grid-scale energy and data-center infrastructure pinned speculation, magnified by the difficulty of starting new projects for fresh ore supply.

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