Market Overview: Gold and silver are both moving slightly higher in early trade today as the new trading week gets off to a slow start. Markets may seem some relatively range bound price action ahead of this week’s FOMC meeting. Gold and silver are both likely seeing some short covering and bargain hunting following recent downside. Gold has lost over $60 per ounce in recent weeks as A March interest rate hike from the Fed may not have been discounted by market participants.
Key Data Points: There are no major economic reports set for release today. In addition to the Fed this week, investors will get the latest readings on CPI, Retail Sales, Empire State Manufacturing, MBA Mortgage Applications, Housing Market Index, Weekly Jobless Claims and more. The Fed will be the highlight of the week for investors.
Outside Markets: Stocks are trading slightly lower in quiet trade. Stocks have backed off from recent highs, but not by much. Equities will likely be very quiet this week ahead of the Fed.
Crude oil is also slightly lower today in early action. The oil market is now below the psychologically important $50 per barrel level as a massive build and higher rig count have fueled some selling. Although weaker oil has not had a major impact on stocks, a further slide in crude prices could potentially begin to weigh heavily on stocks and overall risk appetite.
Interest rates are ticking slightly higher in early action today. Like stocks, the bond market may be somewhat slow ahead of the Fed announcement.
The Big Picture: The gold and silver markets have been moving lower as a March rate hike may have caught investors off-guard. It would seem at this point that the metals have priced in this coming rate hike, although another knee-jerk reaction lower could potentially be seen.
Markets will be paying very close attention to the central bank’s statement following its decision on rates. Not long ago, markets seemingly doubted that the Fed would actually hike rates three times this year as it has penciled in currently. After recent data and rising inflationary pressures, there are whispers of possibly four rate hikes this year.
The Fed has sounded considerably more hawkish in recent commentary, and if the central bank signals to markets that an additional hike could be on the table, it could potentially send the metals even lower while also possibly causing some selling in equities. The bond market could potentially have a significant reaction, as well, and significant selling in bonds may also give investors reason to hit the sell button.
