Market Overview: Gold is under some selling pressure in early action Friday as investors digest some hawkish commentary from a Fed official this morning. The comments do appear to be shifting rate expectations slightly, with chances of a September hike on the rise, yet still very low. It does appear, however, that the central bank will take action before the end of the year. This, of course, could also change in the coming weeks as more data is seen. Another lackluster jobs report, for example, could potentially influence the Fed to wait until early 2017 before raising rates further.
Key Data Points: There are no key data points set for release today. Investors will focus on today’s commentary from Boston Fed President Eric Rosengren and will prepare for more data next week.
Outside Markets: Stocks are trading sharply lower today as the notion of rising rates takes hold. Stocks have been moving sideways for some time now, and the market could potentially be on the verge of a decent pullback or correction. This could potentially work in gold’s favor.
The dollar index is moving moderately higher today as the chances of a rate hike appear to be on the rise. This dollar strength is likely weighing on various commodities today, including gold, silver and crude oil.
Crude oil is declining today as the recent steep decline in stocks is being considered a weather-related outlier by investors. Some analysts expect a build in crude stocks next week, and many also seem to doubt that any concrete action will be taken to curb production. If crude does roll back over and starts heading lower again, it could potentially add further pressure to equity markets.
Treasuries are seeing some selling today as the notion of higher rates takes a toll and the ECB did not announce fresh stimulus measures at its meeting yesterday.
The Big Picture: Gold and other markets remain vulnerable to the notion of rising rates, and the selling being seen today is likely a direct result of some hawkish commentary. While this could potentially change, it appears that perhaps the Fed is readying markets for a rate hike, and wants to avoid any significant market volatility. At this point, it appears that it would take some very significant misses in key data points for a hike to be put off until 2017, and markets may see some initial selling as the idea of a hike is digested.
