Market Overview: The gold and silver markets are under pressure once again today as the “Trump” rally in stocks continues. Markets have thus far not exhibited the type of reaction that many analysts had called for if Trump were to be elected the next President, and positions may continue to be unwound as some investors come to terms with being on the wrong side of the trade. The key outside markets are not doing gold and silver any favors right now either, and it seems that these metals could potentially have more room to slide before finding a bottom.
Key Data Points: Today will be quiet from a data release standpoint, however, the rest of the week will provide plenty of data for investors to chew on. The rest of the trading week will bring the latest readings on Retail Sales, Empire State Manufacturing, MBA Mortgage Applications, PPI, Weekly Jobless Claims, Housing Starts, CPI, Leading Indicators and more.
In addition, there will be several Fed officials speaking at various engagements throughout the week.
At this point, the Fed remains very likely to hike rates next month, and it would likely take some very serious misses in key data points to cause the central bank to wait until early 2017.
Outside Markets: The story right now is the bond market. Bonds have seen significant selling in the aftermath of the Trump victory, and yields could potentially continue to rise even further. Increased infrastructure spending could potentially boost growth while stoking inflation, and that could possibly lead to a faster pace of interest rate hikes.
The dollar index is continuing its recent ascent, with the greenback hitting a 10 month high today. The dollar is near the highs of its five year trading range, and could potentially be on the verge of a significant, fresh leg higher.
Also not doing gold and silver any favors is lower crude oil. Crude is approaching $40 per barrel again, and further weakness in oil could potentially act as a drag on stocks. That being said, lower oil also decreases inflationary concerns, which can be considered bearish for gold and silver.
The Big Picture: Gold is testing lows last seen in June, and will either find enough bargain hunters to stop the bleeding, or could see a fresh leg lower in price before finding more stable footing. Given recent strength seen in the dollar as well as equity markets, it is difficult to imagine any sustainable rally in gold at this point. Silver, on the other hand, is used extensively in industry and could potentially benefit from increasing optimism over the economic outlook. Gold could potentially see a move towards the $1000 level before reaching a long-term bottom.
