Market Overview: Gold and silver are trading slightly lower in quiet early action today. Gold has a number of potential issues working against it currently, and prices have hit a two week low. Gold saw heavy selling yesterday, as investors appear to be concluding that a March rate hike is not only possible but at this point is quite likely. Stocks have also continued their ascent, and slid appetite for risk is not doing the yellow metal any favors either. Gold is on track for a weekly drop, and could potentially remain under pressure if the Fed hikes rates and maintains a more hawkish tone.
Key Data Points: The latest reading on the ISM Non-Manufacturing Index came in at 57.6. New order growth has remained steady.
The latest reading on the PMI Services Index Flash came in at 53.8. This was the lowest reading in five months, but overall the report continues to point in a positive direction.
Likely the most important release for the day will be remarks by Fed Chairwoman Janet Yellen at the Executives’ Club in Chicago. With a lot of recent hawkish talk from various Fed officials, investors will be looking for any further clues about the central bank’s plans regarding interest rates. Ms. Yellen’s commentary has the potential to move markets, although it appears that investors have already begun bracing for a March rate hike from the Fed.
Outside Markets: Stocks are moving slightly lower today as investors await further details about the Fed’s plans. The notion of a March rate hike has taken some wind out of the market’s sails in recent days, and a more hawkish-sounding Fed could potentially weigh on stocks.
Bonds and notes have been sold-off this week as the likelihood of a March rate hike has increased substantially. Comments from various Fed officials would seem to indicate a March hike is very likely at this point, and bond investors have taken notice. Bonds are at the bottom of their recent range, and could potentially be getting ready for a test of the post-election lows.
Although its lower today, the dollar index also appears to be on the rise based on the notion of a March rate hike and stronger economic data.
The Big Picture: With a potential rate hike looming, gold and silver may see some selling enter the market. These markets have held up well thus far, however, despite several bearish influences. If the Fed does act this month, it may be an important test for the underlying strength in the gold market.
