Market Overview: Both gold and silver are trading slightly lower this morning as risk appetite remains high and as key outside markets also likely fuel some selling in the metals. Both gold and silver remain on the defensive, however, and it remains to be seen if physical demand will be enough to stop the slide. Investors may remain somewhat subdued in the precious metals complex ahead of next week’s highly anticipated FOMC meeting. It is expected that the central bank will raise rates for the first time in a year. Although this may be considered bearish for the precious metals complex, gold and silver could potentially see a case of “sell the rumor buy the fact” and possibly start to rally once the Fed does in fact take action.
Key Data Points: The only major piece of economic data set for release today is the latest reading on Consumer Sentiment. The figure came in at the high end of consensus estimates with a reading of 98. Expectations of new economic policies appear to be the main driver behind the surge in sentiment.
This week’s QE extension by the ECB did not have much effect on U.S. markets.
Outside Markets: Stocks are picking up where they left off yesterday, and are seemingly drifting higher with no sign of resistance. Although the current rally is not likely to last forever, there is no telling just how far equities might climb before finding a near-term top. Higher risk appetite for the time being may keep a bid in stocks while also potentially keeping a lid on any significant rallies in perceived safe havens such as gold and silver.
Treasuries are being sold off again today as interest rates continue their recent ascent.
The dollar is heading higher today, and appears poised to challenge recent highs. The combination of rising interest rates and a stronger greenback appear to be posing a significant hurdle to a gold or silver rally.
The Big Picture: The rally in risk assets over the last several weeks appears set to continue. As long as risk appetite remains elevated, the gold and silver markets may potentially have a tough time putting together any significant rallies. That being said, however, things can and do change quickly.
Physical demand for gold and silver may potentially stem the recent bleeding, and further clarity on many of the economic and geopolitical policies discussed in recent weeks also has the potential to drive a reversal in these metals.
