JM Bullion Weekly Market Review (12/16/16)


Market Overview: Both gold and silver are moving slightly higher in early action today. These precious metals are likely seeing a bounce on both short covering as well as bargain hunting after seeing significant declines this week. Speculation appears to be on the rise that the Trump rally in stocks may have run its course, and equities may potentially be overvalued at current levels. The Federal Reserve on Wednesday not only lifted rates but also came out with a more hawkish tone than was expected. It is this hawkishness that may potentially keep any sizable rallies in gold or silver at bay. Investors will likely focus their attention more on the data stream in the coming months, and look for further signs of a strengthening economy.

Key Data Points: The latest reading on housing starts this morning showed a reading of 1.090 M which was well below consensus estimates of 1.230M. The housing market continues to show some significant volatility.

Richmond Fed President Jeffrey Lacker will be speaking at an economic outlook conference in Charlotte, N.C.

Outside Markets: Stocks are mostly flat this morning while crude oil sees a slight rise. Treasuries are seeing more selling today as rates continue to rise.

The dollar index is slightly lower today, and the precious metals bulls will likely welcome any signs of weakness in the greenback. The dollar appears to be in the midst of a fresh breakout to the upside, and further dollar strength could potentially weigh further on gold, silver and dollar-denominated commodities.

The Big Picture: Now that the Fed has actually taken action and raised the Fed Funds rate, markets will likely monitor the data stream closely for further signs of strength. A more hawkish-sounding Fed was a bit of a surprise to markets this week, and investors will now ponder the potential effects of a quicker pace of rate hikes. Although the Fed appears to be looking at three hikes in 2017 rather than two, some analysts question whether or not the central bank will actually follow through on such a plan. After all, several hikes were supposed to take place in 2016, and only one hike was actually implemented.

As euphoria over the Trump Presidency begins to wear off, it remains to be seen if many of the policies discussed will actually be implemented. Should Trump boost spending while lowering taxes, it could potentially have a significant inflationary effect and could potentially fuel demand for gold and silver as an inflation hedge.

All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of JM Bullion Inc. and should not be construed as financial advice.