Market Overview: Gold and silver are moving modestly higher in early action today to begin the new trading week. Investors are likely still digesting last week’s commentary from Fed Chairwoman Janet Yellen. In comments made on Friday, Ms. Yellen all but assured markets that a rate hike would be seen at the central bank’s meeting this month. Ms. Yellen also alluded to the possibility of a faster pace of rate hikes than what has been previously anticipated. Thus far, gold investors appear to be taking the news in stride, but the gold market may see a good test of its strength in the coming weeks.
Key Data Points: The latest reading on Factory Orders is set for release later this morning. Consensus estimates are looking for a rise of 1.1 percent.
Minneapolis Fed President Neel Kashkari will be speaking this afternoon at a NABE conference.
Although investors will have plenty of data to chew on throughout the trading week, the most important will be Friday’s Employment Situation report. The U.S. is expected to have added 195,000 jobs with the unemployment rate at 4.7 percent. A strong number may essentially guarantee a Fed rate hike later this month. It would likely take a very significant miss at this point, however, for the Fed to elect to hold off.
Key Outside Markets: Stocks are moving lower this morning to begin the new trading week. News of North Korea test firing some ballistic missiles into the sea is likely fueling some risk aversion today. Markets are also still digesting recent hawkish Fed commentary and preparing for another interest rate hike later this month.
The notion of higher rates has been lifting the dollar index, and a test of the post-election highs could potentially be in store.
Bonds and notes have seen some heavy selling in recent action, but have thus far not broken the lows of the recent range.
The Big Picture: With a rate hike looming, the strength of the recent rally in gold is likely to be tested in the coming weeks. Gold has been supported by headline risk and a degree of risk aversion, even as stocks have made fresh all-time highs. While this could be indicative of underlying strength in the gold market, the bulls may need some additional catalyst to take prices higher in the near-term. For now, the path of least resistance in gold still remains higher until proven otherwise.
