Market Overview: Both gold and silver are trading slightly lower in early action this morning. Investors continue to watch headlines concerning the Trump administration, and are also digesting Fed Chairwoman Janet Yellen’s commentary from yesterday. These metals may also be affected by numerous key data points set for release today.
Key Data Points: MBA Mortgage Applications this morning showed a decline in both new mortgage applications as well as refinancing activity last week.
The Consumer Price Index today showed mounting inflationary pressures. The gauge showed a reading of .6 percent while consensus estimates were looking for a reading of .3 percent. Less food and energy, the core CPI rose .3 percent with consensus estimates looking for a reading of .2 percent.
Headline year-over-year CPI is on the rise and currently at 2.5 percent. This level is higher than the Fed’s target of 2 percent.
The latest reading on retail sales showed a rise of .4 percent in January, way better than consensus estimates. The report also included revisions to December’s data, putting December retail sales up a solid 1 percent.
The latest reading on Empire State Manufacturing showed the strongest reading in 2.5 years at 18.7 This figure was well above consensus estimates.
The Housing Market Index will also be released later this morning.
Outside Markets: Stocks are moving slightly lower this morning as investors contemplate the potential for a March rate hike. Interest rates are on the rise again and the dollar index is also strengthening.
Stocks may simply be taking a breather after recently making fresh all-time highs, and investors may want to see further action from the new administration before another leg higher in stocks is seen. Of particular interest is the administration’s potential tax cut and fiscal spending plans. President Trump has indicated that significant tax reforms would be presented in the coming weeks. If the administration’s plans are met with investor approval, stocks could potentially be off to the races once again.
The Big Picture: Following some very solid economic data and Janet Yellen’s comments yesterday, investors may be bracing for a March interest rate hike. Although some analysts believe that June is still the most likely time frame for the next hike from the central bank, it seems Ms. Yellen has given the markets something to think about in the meantime.
Strong data along with rising inflationary pressures could potentially put the Fed on a faster track with regards to tightening, and this could potentially fuel strength in rates and the dollar but also potentially weigh on gold and silver.