Gold is slightly firmer this morning but currently well-off its session highs. Stocks are higher this morning along with the dollar index while crude oil prices are slightly lower on the session.
Gold may be seeing renewed buying interest on safe-haven buying as concerns over additional terrorist attacks mount. In Mali, terrorists recently took 170 hostages at a Radisson Hotel. This latest act comes just a week after the deadly attacks in Paris.
The U.S. is on a heightened state of alert as concerns over a potential threat against New York City and other targets has caused a beefed-up police presence. While the recent attacks have not had a significant impact on global markets at this point, gold and other perceived safe-haven assets could see some steady demand if concerns intensify.
The gold market also continues to digest this week’s FOMC meeting minutes. The Fed has seemed to indicate that a rate hike will in fact be seen next month and that they feel economic conditions warrant such a move at this point.
While this could potentially weigh on gold and silver in the near-term, the actual lift-off could also possibly spur a rally in the precious metals as uncertainty surrounding the first rate hike is removed.
The central bank did also state, however, that the pace of any further rate hikes would be very slow and gradual. This could be considered bullish for gold and silver. It will also be interesting to see what happens down the road as the U.S. looks to raise rates while the ECB and elsewhere looks to keep rates very low and even introduce additional stimulus measures. One has to wonder if the Fed could be hiking rates only to have the option of lowering them again later.
While much of the economic data has pointed to further economic recovery, there are some concerns remaining about the strength of the economy and the potential effects of a rate hike. In reality, however, an initial 25 basis point rate hike will likely not have much of an impact on the economy and is not likely to derail current economic momentum.
Stocks have moved higher this week and could potentially weigh on precious metals if further strength is seen. Thus far, equity investors appear comfortable with the notion of higher rates although such sentiment has the potential to change quickly once rates actually do go up.
Gold may remain on the defensive in the near-term and may see one final significant move lower before a long-term base can be built.
