Written Commentary
US Dollar Likely to Recover
October 8, 2024
GOLD
December gold futures advanced to new record highs yesterday after the Federal Open Market Committee announced it decided to lower its fed funds rate by 50 basis points to 4.75% – 5.00%. This is the first rate cut since March 2020. Fed Chair Jerome Powell at his press conference stated that the Fed is not in a rush to ease monetary policy, and that half-percentage point cuts are not the “new pace.”
The Federal Open Market Committee released its economic projections. The unemployment rate projection for 2024 was increased from 4.0% to 4.4%. The PCE Inflation projection was lowered from 2.6% to 2.3%, and the Core PCE Inflation projection was reduced from 2.8% to 2.6%.
Recent weakness in the U.S. dollar has contributed to gains in precious metals. Additional supportive influences for gold are its safe-haven appeal and aggressive buying by central banks.
SILVER
In light of yesterday’s Federal Open Market Committee pivot to accommodation, December silver futures are sharply higher today and are now trading at the highest level since July 17. Recent weakness in the U.S. dollar has contributed to speculative buying in silver with the July silver contract trading above $31.50 per ounce today.
Price gains may be limited by disappointing economic data from a large silver consuming country in Asia.
COPPER
Recent gains in copper futures are linked to easier credit conditions from the Federal Reserve along with prospects of accommodative policies continuing well into 2025. The December coper contract today traded at its highest level since July 18.
Futures have also been supported by reports of energy shortages in Zambia, which reduced output from one of the world’s main copper ore producers. Also, recent weakness in the U.S. dollar has contributed to higher prices for copper futures.
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