Market Overview: Both gold and silver are moving slightly higher in early trade today. The precious metals may remain somewhat subdued today as investors await this afternoon’s release of the latest FOMC meeting minutes. A primary area of focus for the precious metals has been the stronger dollar index, which is trading at multi-month highs. Following last week’s major decline, silver has thus far not been able to get much going to the upside, and the market could potentially stay under pressure if the dollar strengthens and an ongoing lack of any fresh bullish inputs is seen.
Key Data Points: MBA Mortgage Applications showed a slowdown last week, registering a composite index reading of -6 percent. Purchase applications are, however, a whopping 27 percent higher than the same week a year ago.
There will be a couple Fed official speaking today at various engagements, although the data highlight of the day will be the release of the latest FOMC meeting minutes.
Investors may closely scrutinize the Fed minutes as bets are placed on a rate hike by year’s end. Right now, Fed Funds futures contracts are pointing to about a two-thirds chance of a December rate hike by the central bank. Investors will look to see how many shared the views of the dissenters from the last meeting, and whether or not hawkish pressure is building. If there does not appear to be more pressure on Janet Yellen, then it may still be possible that the central bank remains on hold if there is some significant data that disappoints.
Outside Markets: Stocks are slightly lower in quiet, early trade while crude also declines. The dollar index is moving higher again, and is trading at multi-month highs. The dollar has been getting a lift from interest rate expectations as well as from a declining Great British Pound. Both of these factors could potentially keep the greenback moving higher, and further dollar strength may potentially become a significant headwind for silver and precious metals.
The Big Picture: For all practical purposes, it appears that a rate hike will be seen in December. Although today’s Fed minutes may establish more credibility for the hawkish case, they could also potentially fuel a decline in rate expectations if it is shown that several officials remain firmly in the dovish camp.
A rate hike appears to be very likely at this point and the metals complex is in need of some type of bullish catalyst to jumpstart a potential rally. Such a catalyst could potentially be in the form of Brexit troubles, further Deutsche bank troubles or additional stimulus measures by other central banks.