Market Overview: The gold and silver markets simply do not have a whole lot working in their favor right now. These precious metals are both lower in early action today, as strong risk appetite, a higher dollar and rising rates all take a toll. Of course, it will be some time before investors can see if many of the policies discussed by President-Elect Donald Trump are actually put into motion. Markets have been moving higher on economic optimism as Mr. Trump has pledged to cut taxes while increasing spending on infrastructure. It remains unclear, however, just how he plans to accomplish this. On the plus side for gold, if the deficit is allowed to balloon up, it could potentially cause increasing anxiety over U.S. debt levels and spur buying in the yellow metal and other perceived safe havens.
Key Data Points: Investors will get the latest reading on Leading Indicators later this morning. Consensus estimate are looking for a modest .1 percent gain for October.
Investors will also get the latest reading on the Kansas City Fed Manufacturing Index.
There are several Fed officials speaking today at various engagements.
Outside Markets: The big story right now for gold and silver has the be the rising dollar index and rising interest rates.
The dollar index appears to be on the verge of a major upside breakout. The greenback is currently trading at the highest levels since the early 2000s, and more upside could be in store. Obviously, a stronger dollar can be a negative for raw commodities which are denominated in dollars, and gold and silver are likely seeing further selling pressure due to the current strength in the currency. This begs the question, however, of just how far the dollar can run before really taking a toll elsewhere. Stocks could begin to come under pressure as corporate profits could be hurt on lower exports.
Since Mr. Trump was elected, the bond market has been on the decline, with rates rising substantially from levels seen just a couple weeks ago. Given the recent rise in rates, you have to wonder if a rate hike by the Fed next month is even necessary. The Fed will still likely raise rates, but will also likely be cognizant of the recent rise in long-term rates and will be very careful not to tighten credit too quickly going forward.
The Big Picture: For now, the precious metals complex is likely to remain on the defensive as risk appetite remains high. Some analysts have already begun to suggest that the recent rise in stocks and decline in rates has been overdone, and seeing a significant pullback in both markets would not be too surprising. For the time being, however, gold and silver may have a difficult time putting together any sustainable rallies.
