Price action in precious metals in mixed this morning with gold moving slightly lower while silver prices move moderately higher. Stocks are trading flat while crude oil and the dollar both rally.
Gold is seeing some consolidation today as the market remains somewhat range bound. While the bulls still have the technical advantage, the market may need to see another push to the upside in the near future to keep buying interest elevated.
Likely weighing on gold today is the stronger U.S. dollar index, which has seen some buying yesterday and today. While the trend in the dollar is clearly down, the market did make a higher low recently and could potentially see further upside on short covering and fresh buying.
The action in the dollar may remain somewhat muted, however, until markets learn more about the pace and timing of further interest rate hikes by the Fed. The dollar could also potentially see some recovery of the ECB decides to take further action regarding QE or negative interest rates. In the news today is the idea that the Bank of Japan will move further into negative interest rate territory when it meets next week. The BOJ has two lending facilities, and could potentially apply negative rates on both facilities.
The Federal Reserve will also be meeting next week and could potentially provide more clues as to the timing of the next hike. It is the opinion of some that the central bank will not hike at the April meeting, but that a June hike is likely. Should the Fed provide clues to a June hike, the dollar could potentially see some buying and stocks could potentially see some selling. Whether or not a June hike will significantly affect gold and precious metals remains to be seen. The metals have likely priced in such a hike, yet initial reactions always have the potential to drive market volatility.
Gold investors will likely remain focused on the notion that interest rates are not likely to rise by much any time soon. While the domestic economy has shown some very convincing signs of improvement, the central bank is likely to take its time raising rates in order to avoid spooking investors and halting growth. In addition, the Fed may want to proceed slowly given the fact that other nations are still actively engaged in QE, negative interest rates or other stimulative measures.
