Market Overview: Gold and silver are both moving higher in early trade as some last minute position squaring and short covering are featured. Markets are readying themselves for what could be considered the most important news release of the month — a speech by Federal Reserve Chairwoman Janet Yellen from the Fed symposium in Jackson Hole, Wyoming. Investors are hoping that Ms. Yellen will shed more light on the potential timing of the Fed’s next rate hike, which could come as soon as September.
Key Data Points: Q2 GDP data released this morning was quite soft, registering a reading of 1.1 percent. While the headline number is certainly nothing to write home about, the report did have a major positive in that consumer spending registered an annualized growth rate of 4.4 percent.
Consumer Sentiment is set to be released later this morning, and consensus estimates are looking for a reading of 90.7.
The Fed symposium from Jackson Hole, Wyoming will take center stage today and has the potential to significantly move markets. While some believe the central bank will not provide any detailed clues as to the timing of the next hike, others believe that the Fed could come out with a more hawkish tone which, in turn, could signal a rate hike in September.
Outside Markets: Stocks, oil, gold and silver are all moving higher in early action while interest rates are seeing a very slight decline. Much of the early price action today is likely position squaring ahead of what could be a big speech, and many investors are likely electing to sit on the sidelines until the Fed has spoken today.
The dollar index is moving lower in early trade, and remains vulnerable to further selling if the Fed appears to remain on the dovish side of the ledger.
The Big Picture: While today’s remarks by Janet Yellen have the potential to be market moving, it remains to be seen how gold and precious metals will react of the Fed does in fact raise rates again. Given the fact that much of the world remains awash in QE and easy money policies, it is difficult to imagine a scenario in which the Fed raises rates significantly higher any time in the near future. This notion could potentially drive further buying in gold and silver, in what could turn out to be a case of “sell the rumor buy the fact” type of trade.
While the Fed may drive gold prices in the near-term, there are still numerous global economic issues that could potentially keep gold and silver well-supported.
