Market Overview: Both gold and silver are moving slightly higher today in early trade. In a classic case of “sell the rumor buy the fact” trade, both of these metals have come back from recent lows following the Fed meeting conclusion on Wednesday afternoon. The metals have likely seen some sort covering as well as bargain hunter buying since then, and have recouped a significant amount of recent downside.
Key Data Points: The latest reading on Consumer Sentiment showed a reading of 97.6, slightly above consensus estimates of 97.2.
The latest reading on leading indicators showed a rise of .6 percent compared to consensus estimates of a .4 percent rise. This indicator continues to point to ongoing economic strength and strong consumer expectations.
The biggest data highlight of the week was Wednesday’s FOMC meeting conclusion. The central bank elected to hike interest rates by .25% in a move that was widely expected. After significant hawkish rhetoric from various Fed officials in recent weeks, some analysts were questioning whether the Fed may change its forecast, calling for an extra fourth rate hike this year. The Fed did not, however, make any changes to its plans, and the central bank still sees three hikes this year and three hikes next year as it looks to normalize monetary policy.
A more dovish sounding Fed could keep the rally in stocks going, but may also potentially give some renewed energy to the precious metals bulls.
Outside Markets: Today is quadruple witching day, and market action may be sloppy and somewhat erratic. Stocks are moving slightly lower in early trade as is the dollar index. Bonds are moving slightly higher as rates decline slightly.
The Big Picture: With the Fed meeting out of the way, markets will once again focus their attention on the data stream as well as any ongoing developments from the Trump administration. Investors are awaiting more details on the administration’s tax reform and fiscal spending plans. These plans have boosted economic optimism and been a large factor in the stock market rally and bond sell off. Although investors have been patient thus far, at some point they will want to see real progress being made on implementation.
With the Fed taking a more cautious approach to tightening, the path of least resistance in stocks remains higher, and that may potentially keep any upside in the metals somewhat limited.
