Market Overview: The precious metals markets are mixed in early action today, with gold dropping by a few dollars per ounce and silver rising by a few cents per ounce. Markets are still digesting Friday’s much stronger than expected non-farm payrolls data, which blew away consensus estimates and may shift expectations of another interest rate hike this year. Markets are see lower trading volumes this week, as many investors look to take vacations before summer comes to an end.
Key Data Points: There is no key data set for release today, although investors will get some more economic data to chew on later in the week.
Investors will have the opportunity to look over the latest readings on Productivity and Costs, MBA Mortgage Applications, Weekly Jobless Claims, Retail Sales, PPI, Consumer Sentiment and more.
Investors will be looking for further signs of economic strength, and any large disappointments could potentially keep investors guessing about the timing of the next rate hike. While jobs has certainly shown some improvement, investors and policymakers may want to see improvement in other key areas such as manufacturing and durable goods before further tightening.
Outside Markets: Stocks are slightly higher today to begin the new trading week after notching some fresh all-time highs to end last week. For now, the path of least resistance remains higher in equities, although it remains unclear how stocks may react if the Fed does in fact raise rates again.
The dollar index is moving higher today and also could potentially see further upside. Stronger than expected economic data, along with negative rates in the EU and Japan may keep the greenback well-supported, and the index could potentially trade at significantly higher levels. This may act as a drag on gold and precious metals, as a stronger dollar makes these metals relatively more expensive for foreign buyers. Interest rates remain at low levels, however, yields have risen in recent days and more encouraging economic news could potentially lift yields further.
Crude oil prices have bounced back sharply from sub $40 levels recently seen, and are trying to maintain trade above the $40 per barrel level. Stable or rising crude oil prices may give equity investors another reason to buy.
The Big Picture: While some follow through selling in gold today comes as no surprise, it remains to be seen if this will simply prove to be another buyable dip or a larger change in trend. While gold has a number of bullish factors working in its favor, it must also contend with the notion of rising rates in the U.S., the possibility of a stronger dollar index and stronger stocks and risk appetite.
