Market Overview: Both silver and gold are slightly lower in early action today as some profit taking is likely featured. Investors are awaiting further data inputs this week, and markets are still trying to gauge the likelihood of a September rate hike. Trading volumes appear to already be on the decline, as many investors take vacations before summer’s end.
Key Data Points: MBA Mortgage Applications today showed a decline of 3.5 percent for the composite index. Refinancing activity also saw a decline even as mortgage rates dipped.
The ADP Employment Report showed the U.S. added 179,000 private sector jobs in July. This number was slightly above analyst expectations of 165,000 jobs added, and could be seen as an encouraging sign for Friday’s non-farm payrolls data. That being said, however, the ADP report and the report from the U.S. Department of Labor have shown some significant divergences in the past and a good ADP report does not necessarily mean a strong non-farm payrolls report. The ISM Non-Manufacturing Index is set for release later this morning, and is expected to show a reading of 56, in another sign of strength.
Outside Markets: Stocks are slightly lower today as investors weigh the likelihood of a September rate hike and some profit taking is seen. The broad market S&P 500 had been coiling sideways for several sessions before seeing a breakdown in yesterday’s action. While that break below the recent trading range could potentially be a sign of more downside to come, it remains unclear if stocks have found a top.
Crude oil is seeing a slight bounce today, but remains under the $40 per barrel level. Further weakness in oil may weigh on equities and risk assets, and some analysts are calling for prices to return $35 per barrel.
The dollar index is getting a slight lift today likely on the back of the ADP jobs report. The greenback remains on the defensive, however, following sharp selling seen Friday after the much weaker than expected GDP data.
The Big Picture: Both silver and gold appear poised for higher prices, although this time of year can make it difficult for markets to see any sustained directional price movement. For now, both silver and gold will likely be driven by central bank policy and overall risk appetite. A breakout of sideways action in stocks could also potentially fuel the next move in silver and gold, with silver and gold standing to potentially benefit if stocks come under pressure and risk aversion ticks higher.