Market Overview: The gold market is slightly lower in early trade today as equities rally and risk appetite appears to be elevated. Gold has seen some moderate declines this week following the release of the latest FOMC meeting minutes which seemed to indicate a June interest rate hike is still very much on the table. Despite gold’s weakness this week, the market remains within the trading range seen over the last several months.
Key Data Points: Today is very light from a data perspective, with little data set for release. Existing Home Sales has been released showing a 5.45 million annualized pace. Median home prices also rose and overall the data appears to be positive. While housing data, along with many other areas of the economy is not super strong, the market does continue to show signs of gaining some traction.
Clearly, the most key piece of data this week was the release of the latest FOMC meeting minutes. These minutes caused some initial selling in precious metals as well as equities, while the dollar index has gotten a boost. The notion of a June interest rate hike still being on the table could potentially cause some volatility in the coming weeks as investors await more guidance from the central bank.
Outside Markets: Stocks are moving higher today as the initial worries over a June rate hike appear to be fading. The reality is that markets and the economy are still facing numerous hurdles. Ongoing weakness in China, a “Brexit” vote and other issues may potentially keep investor enthusiasm-and global economic activity at bay for now. Stocks could potentially be a big piece of the puzzle when it comes to higher gold in the coming months and years. Stronger equities may possibly weigh on gold prices as risk appetite remains elevated. On the other hand, if stocks are unable to start a fresh leg higher into new all time highs, investors could potentially become quicker to sell, and more risk aversion could potentially be seen.
While crude oil is slightly lower today, the market remains near the $50 per barrel markand is likely continuing to drive investor appetite for stocks and other risk assets.
The dollar index is moving higher again today and another test of the recent lows appears to be out of the cards, for now at least. The dollar could potentially keep moving higher or stay relatively rangebound until June, when the Fed provides more clarity on interest rates. In the meantime, a stronger greenback could potentially weigh on gold and other commodity prices.
The Big Picture: While the path of least resistance for gold still remains higher, the rally may face some key tests in the near future. Whether or not the current dip is bought remains to be seen, and further downside could potentially drive more longs from the market. Gold, like other markets, may stay relatively rangebound until more clarity regarding rates is seen. In addition, gold investors will likely pay close attention to equity markets and overall risk appetite or lack thereof.
