Market Overview: Although both gold and silver are slightly higher in the final trading session of the year, it appears that it will be a dull one. Markets are essentially just drifting today as many investors are more focused on their New Year’s celebration plans than anything else today. Investors will further turn their attention next week to the incoming Trump administration’s plans while continuing to monitor the state of the economy.
Key Data Points: The latest reading on Chicago PMI is expected later this morning. Consensus estimates are looking for a reading of 57. November saw strong gains in this data, and forecasters expect the December reading to hold onto the bulk of those gains. Outside Markets: Stocks are in the green in early trade, while crude oil moves slightly lower. Both bonds and the U.S. Dollar index are also moving slightly lower in early action.
The “Trump” rally in stocks could very well last well into the first quarter of next year, and should stocks continue their march higher it may weigh on gold and silver prices.Likewise, the Trump rally may also see continued buying in the dollar index, and further strength in the greenback will also quite likely weigh on gold and silver.
Although the selling in treasuries has slowed, it remains unclear if the bond sell-off is over. Although a bounce in bonds after such a swift and severe sell-off would come as no surprise, some analysts also believe that perhaps rates have risen too far too fast and that a substantial correction may take place.
The Big Picture: It was an interesting year for gold but it is important to remember that the yellow metal is still higher than where it began the year. There are a number of potential issues that could fuel a significant turnaround in gold and silver in the New Year, and markets may either cheer on progress made by a Trump administration or sell-off if disappointed.
With so many potential economic and geopolitical issues that may surface in the coming year, it is difficult to imagine a scenario in which gold and silver prices fall a lot further than they already have. That being said, it is also plausible that any further sell-offs in the metals may be met with significant buying interest from long-term investors and that 2017 could mark a multiyear low for these metals.