Market Overview: Both silver and gold are moderately lower in early action today as investors await the release of the latest Fed meeting minutes this afternoon. Low summer trading volumes may also be a factor today and over the next few weeks, and some degree of volatility could be seen going into and in the aftermath of today’s Fed minutes. Speculation over the possible timing of another rate hike has been a central market theme for some time now, and today’s minutes could potentially shed further light on when the central bank could tighten further.
Key Data Points: MBA Mortgage Applications saw a decline, with the purchase index falling by four percent. The refinancing index also declined by four percent, even though rates were lower for the week.
This afternoon, markets will get the release of the latest FOMC meeting minutes which will undoubtedly be the most key piece of data this week. The idea of a 2016 rate hike has seemingly gone back and forth from likely to unlikely, and today’s minutes could potentially provide investors with more clarity on when the central bank may act this year, if at all.
While a September rate hike is a possibility, it would seem extremely unlikely at this point and December seems to be a much more realistic possibility. That being said, the Fed and investors will monitor the data stream closely over the next several weeks, as further signs of strength could increase the odds of a December rate hike while any significant weakness seen could potentially keep the Fed on hold until early next year.
Outside Markets: Stocks and the dollar index are slightly higher in early trade while crude oil moves slightly lower. Stocks have remained strong in recent weeks, although the idea of a rate hike in 2016 could potentially be the catalyst for a decent correction.
The dollar is seeing a slight bounce after recent downside, and will likely take its cues from the Fed minutes today. Should the minutes appear to sound more dovish, the dollar could come under further pressure and gold and silver could potentially see further buying interest.
The Big Picture: Both gold and silver have held up well despite equities making fresh all-time highs. While risk aversion has taken a backseat to risk appetite, there are still many issues that could potentially keep a floor under gold and silver prices. Heading in the last two weeks of summer, the precious metals markets will likely be driven by interest rate expectations as well as overall risk appetite. In addition, investors will continue to monitor other areas such as the EU and Japan for any signs of economic improvement and will also likely keep a close eye on the U.K. for any signs of Brexit related stress.