U.S. markets were closed yesterday in observance of the memorial day Holiday. Markets will, however, have more data to consider throughout the trading week as, well as the prospects for a rate hike from the Fed.
This week, investors will get the latest readings on durable goods orders, new home sales, consumer confidence, the Case-Shiller Housing Index, weekly jobless claims, pending home sales, GDP and more.
Investors will be watching the data closely following comments made last week by Federal Reserve Chairwoman Janet Yellen. In a speech on Friday, Ms. Yellen indicated that the central bank would likely raise rates sometime this year. She cited some of the softness seen in the data, but also added that she believes such issues will improve. She also discussed the labor market and low wages as sources of concern.
Although a June rate hike by the central bank is off the table, a hike in September or even July is a distinct possibility. The notion of higher rates may weigh on gold and the precious metals complex, although it seems likely that the metals complex has already priced in such a scenario.
The dollar index may also weigh on gold and precious metals. With the likelihood of a rate hike in the coming months seemingly increasing, the greenback may see renewed buying interest and resume its previous uptrend. This dollar strength in recent months has likely been a large influence on gold prices and their lack of bullish follow through.
On the subject of currency markets, the euro has come under pressure once again and may continue to work towards parity with the dollar. The shared currency has a number of things working against it currently including the possibility of a Greek exit from the EU, deflationary pressures and a central bank standing by ready to add additional stimulus measures as it sees fit.
Speaking of Greece, the country said yesterday that it will not implement capital controls if unable to reach a deal with creditors. The country is running out of time to complete a deal with its creditors as its four month bailout extension approaches its end. While markets have seemingly ignored this issue in recent weeks, it could come to roost shortly, and could have a significant impact on global financial markets.
For now, however, risk appetites remain relatively high and stocks may continue to make new all-time highs. Perceived safe haven assets such as gold may see limited upside in the meantime, however, that could potentially change quickly and dramatically with ongoing developments surrounding Greece.
