Market Overview: Both gold and silver are seeing some slight selling pressure today as stock index futures point to a higher open. The gold market is also likely seeing some further profit taking after trading at at three month highs recently.After seeing some sideways action, stocks finally broke out to the upside last week, carving out fresh all-time highs in the process. Investor appetite for risk remains robust, and stronger risk appetite for risk could potentially weigh on gold and silver.
Key Data Points: Although there are no major economic reports set for release today, the rest of the week will keep investors busy. Slated for release are the latest readings on PPI, MBA Mortgage Applications, CPI, Retail Sales, Empire State Manufacturing, Weekly Jobless Claims, Housing Starts, Leading Indicators and more. There are also numerous Fed officials speaking at various engagements.
Outside Markets: Stocks are set to open higher this morning as risk appetite remains high. Recent discussions of major tax reforms by the Trump administration have sent stocks to fresh all-time highs, and the rally could potentially have room to run as more investors look to put capital to work.
Of course, recent upside in stocks based on hopes for tax reform could also be quickly undone if further details are not seen soon or if those reforms are not considered significant.
The rally in stocks will also likely need more clarity on the Trump administration’s fiscal spending plans to mount any significant rally from current levels.
The dollar index has reclaimed the 100 level and could potentially be gearing up for a test of the post-election highs.
The Big Picture: Stock investors are cheering on the idea of lower taxes and fiscal spending. Both of these plans are thus far, however, lacking in detail. The Trump administration says it will be announcing tax reforms in the near-future, and this announcement could potentially propel stocks even higher.
Although the path of least resistance in stocks remains higher for right now, the market could potentially be on some thin ice. If the Trump administration is not able to deliver on tax reforms or on fiscal spending, investors’ patience could be tested. In addition, rising geopolitical tensions or issues within the new administration could potentially undermine investor confidence.
Gold has been trending higher in recent weeks, but could potentially face some difficult challenges if stocks and the dollar index continue their recent upside. For now, however, gold may see ongoing buying interest on some degree of risk aversion and an improving technical picture.
