Market Overview: Both silver and gold are seeing some solid gains today as risk aversion continues to take a toll on risk assets. Silver is trading above the $20 per ounce mark, and appears poised for further upside. That being said, silver is well off the recent highs seen in what may simply be some back and fill trade as well as profit taking. The uncertainty over the historic Brexit vote is likely to weigh on sentiment for some time as investors attempt to sift through many of the unknowns surrounding the issue.
Key Data Points: MBA mortgage applications this morning showed a sharp rise in activity, with a significant rise in refinancing activity. This makes sense given the recent decline in interest rates.
The latest reading on ISM Non-Manufacturing registered a reading of 56.5, well above consensus estimates of 5254.1. The report outlined a rise in new orders as well as export orders, and employment also rose, which could potentially be indicative of significant improvement in Friday’s Employment Situation report.
The FOMC meeting minutes will be released this afternoon and is likely to be one of the data highlights of the week. Investors will be looking for any clues as to the timing and pace of further rate hikes as well as the Fed’s assessment on economic conditions. The minutes will likely demonstrate concerns over the potential implications of Brexit, and could potentially sound considerably more dovish.
Outside Markets: Stocks are seeing some pressure today as risk aversion continues to weigh on risk assets. Markets staged a swift recovery from the post-Brexit lows, but could potentially be running out of gas. Weaker equities and risk assets could potentially drive further buying in gold and silver.
Interest rates remain near record lows, and the current state of low or negative interest rates just goes to show how fragile the global economy is. With the potential for a stock market downturn and little to gain from bonds and notes, investors may continue to look for alternatives in which to put capital to work.
Crude oil continues to see some weakness and is now trading around the $46 per barrel level. Ongoing risk aversion and concerns over demand could potentially keep oil prices under some pressure, and weaker oil may add to equity market weakness.
The Big Picture: Global markets have a number of issues to try to sort through, and this could take considerable time. While the Brexit vote has come and gone, significant headline risk does remain. These risks, along with numerous other risks to the global economy, may keep investors a bit leary of risk assets until more clarity is seen. From a technical standpoint, the silver bulls are in charge and further upside may be seen in the coming months. Silver appears to have found a long-term bottom, and could potentially be at the beginning stages of a multiyear bull run.