Market Overview: Both gold and silver are seeing some moderate selling pressure today as recent equity market upside and a lack of fresh bullish inputs drive profit taking. Any movement in gold this week may, however, be somewhat limited in scope ahead of Wednesday’s FOMC meeting. The Bank of Japan will also be meeting later this week. Declining summer trading volumes could also potentially be a factor in gold’s lack of upside recently.
Key Data Points: The only key piece of data set for release today is the Dallas Fed Manufacturing Survey. Forecasts are calling for a reading of 12, as lower energy prices continue to weigh on this indicator.
The rest of this trading week will be busy with many pieces of data set for release. Markets will get the latest readings on PMI Services Flash, the CaseShiller HPI, New Home Sales, Consumer Confidence, Durable Goods Orders, Pending Home Sales, Weekly Jobless Claims, GDP and more.
In addition to the extensive amount of data set for release, investors will pay close attention to Wednesday’s FOMC meeting announcement. While the consensus is that the central bank will make no adjustments to rates this month, The possibility of a September rate hike remains open. Investors will be looking for clues from the Fed as to the timing and pace of any further rate hikes, and the central bank’s thoughts on the potential effects of Brexit. On the other hand, however, some economic data continues to point to improvement, and the Fed could potentially take a more hawkish tone.
The Bank of Japan will also be meeting later in the week and it is expected that the BOJ will take further action to stimulate its economy.
Outside Markets: Stocks are modestly lower in early trade as some profit taking takes place and likely some position squaring ahead of this week’s busy slate of economic data. Stronger equities have likely weighed on gold and precious metals, and could continue to stand in the way of higher gold prices.
The dollar index is slightly lower in early trade today, and may be quiet ahead of this week’s FOMC meeting. While the Fed’s commentary could drive volatility in the greenback, for now the path of least resistance appears to remain higher. The recent dollar strength is also likely acting as another obstacle to higher gold prices.
The Big Picture: The gold market remains on the defensive for now as a lack of bullish inputs dents sentiment. In addition, stronger stocks and a stronger dollar are taking a toll on the yellow metal. For now, risk appetite appears to be relatively robust, and unless more risk aversion is seen, gold could potentially see further selling. This week’s FOMC meeting could potentially give gold a boost if the central bank appears to lean towards the dovish camp.
