Market Overview: The gold market is seeing some moderate selling today in what may simply be more profit taking. Gold saw a large gap up yesterday only to see those gains dwindle throughout the session as stocks recovered. While gold may be susceptible to further profit taking, the market may have a bit of a floor underneath it as the “Brexit” vote approaches. With little clues from the Fed this week regarding its plans on rates, the gold market could also potentially find support from a weaker dollar and/or increasing risk aversion.
Key Data Points: The latest reading on Housing Starts showed a gain of 1.164 M as starts continue to show a positive trend higher. Permits, on the other hand, remain deep in the contraction column on a year-over-year basis with a reading of minus 10.1 percent.
Like other areas of the economy, the housing market is showing signs of life but activity remains somewhat sporadic. Overall, however, the trend in housing and construction remains positive.
Today is also quadruple witching day, on which index futures, equity options, index options and single stock futures expire.
The most significant data point for the week was without a doubt the release of the FOMC statement and commentary. Markets will continue to look for further clues on the pace and timing of additional rate hikes, and will turn their attention next to the upcoming “Brexit” vote next week.
Outside Markets: Stocks are under some pressure today as concerns linger over global economic strength and as the uncertainty over interest rates and a possible “Brexit” take their toll.
Crude oil is seeing a bit of a rebound today following some recent selling and remains under the psychologically important $50 per barrel level.
The dollar index is lower today and remains within striking distance of the lows seen in early May. While the uncertainty over the “Brexit” vote may keep the selling in the dollar subdued for now, the greenback could also potentially see renewed selling pressure if the likelihood of another rate increase this summer decreases.
The Big Picture: After a volatile day yesterday, gold appears to be on solid footing today. Some profit taking should come as no surprise, and it is quite possible that any dips will be bought. Gold may garner increasing interest in the coming days as the “Brexit” vote approaches, and could see another run at the highs reached yesterday. Ongoing uncertainty over Great Britain and interest rates along with concerns over the global economy may potentially keep gold on the rise.
