Market Overview: Markets are calm today as the new trading week gets under way. Geopolitics have taken a turn this past weekend, however, as what some consider fresh provocations by North Korea have increased already high tension levels between the U.S. and North Korea. As the nation has done before, it held a parade on Saturday that showcased some of the country’s military hardware. The hardware seen on Saturday, however, appeared to take many defense and intelligence analysts by surprise. North Korea appears to be far more advanced than previously thought. The showcase of key weaponry will only fan the flames of ongoing tensions as the nation continues to pursue its nuclear program. The situation has increased to the degree that Vice-President Mike Pence has been dispatched to the region and there are discussions taking place about a potential U.S. offensive.
Key Data Points: The latest data on Empire State Manufacturing showed a reading of 5.2 which was below consensus estimates of a reading of 15.0.
The latest data on the Housing Market Index showed a reading of 68, below consensus estimates of a reading of 70. Although this reading was slightly lower than expected, home builders do appear to remain quite upbeat and the sector did see further strength in traffic.
Investors will get plenty more data to chew on throughout the trading week including Housing Starts, Weekly Jobless Claims, Beige Book, MBA Mortgage Applications, Industrial Production and more.
Outside Markets: Stocks have started the week off on the right foot, seeing some moderate gains in early action.
The dollar index is seeing some selling pressure today, and has slipped below the key 100 level. Further dollar weakness may be very supportive for the gold and silver markets.
The Big Picture: The metals complex has seen continued buying interest as some degree of risk aversion has remained present in the marketplace. In addition, concerns over the Trump administration’s ability to pass its tax reforms and fiscal spending proposals may also keep some risk aversion elevated.
The Federal Reserve could also potentially signal a more dovish stance given some recent weakness in economic data and uncertainty over the Trump administration’s plans for taxes and fiscal spending. The recent rally in stocks has been built largely on the notion of these policies being implemented, and if such legislation is not passed or if it is not as significant as previously anticipated, stocks and risk assets could potentially see a major reversal.
The gold market currently has a very positive technical posture, and geopolitical tensions may fuel buying on any significant dips.
