Market Overview: Silver, as well as gold, are slightly higher in early action on Wednesday as stocks trade modestly higher. Gold appears to once again be benefiting from investors buying the dip following yesterday’s losses. The absence of a larger selloff in spite of higher stock prices may be a good sign for the gold bulls, and for the time being the path of least resistance remains higher. Strength in gold could potentially drive further strength in silver, which appears to be in a state of consolidation following recent gains.
Key Data Points: MBA Mortgage Applications this morning showed the composite index at 7.2 percent. While new applications for mortgages are unchanged on a seasonally adjusted basis, homeowners remained busy refinancing existing mortgages. This makes sense given current levels on mortgage rates, and refinancing activity may remain quite robust as long as rates remain near current levels.
The Fed Beige Book will be released later this afternoon and investors will be looking for the Fed’s assessment on economic conditions. With the central bank still monitoring conditions closely, any weakness could potentially further boost the case for the central bank to hold off on any rate additional rate hikes. On the other hand, signs of strength could potentially give the hawkish camp a boost.
Outside Markets: With the S&P500 in new all-time high territory, stocks could potentially be on the verge of a significant leg higher. While it may be difficult to imagine stocks moving even higher after the run up seen in the last several years, the fact is that with yields so low stocks are the only game in town for many investors. This could potentially keep equities on the high side, and could potentially prove to be a headwind for silver and gold.
Crude oil is losing ground today and appears headed lower after failing to maintain any traction above the $50 per barrel level. Further weakness in crude could potentially weigh on stocks.
The dollar index is modestly lower today and remains not far from recent highs. While silver and gold have thus far been able to shrug off recent dollar strength, should the greenback keep moving higher silver and gold could potentially come under some pressure.
The Big Picture: Investors continue to try to make sense of the potential implications of Brexit, and low interest rates remain a cause for concern. Both silver and gold have benefitted from flight to safety buying, however, things have calmed down considerably since the June 23rd Brexit referendum. For now, the path of least resistance remains higher in both silver and gold, although these metals may see some challenges ahead if risk aversion declines further.