Market Overview: Both silver and gold are seeing strong buying interest today as interest rates ease and the dollar declines. These precious metals are likely seeing some short covering and position squaring ahead of global central bank meetings this month including the U.S. Federal Reserve and the ECB. It is widely expected that the Fed will hike interest rates at its meeting next week, and this hike has now likely been fully discounted by the market. Gold and silver are oversold on a short-term basis, and it is not surprising to see bargain hunting coming into the market.
Key Data Points: The latest reading on MBA Mortgage Applications released earlier this morning showed an increase in new home mortgage applications despite rising interest rates, although refinancing activity did see another decline.
Investors still have several key data points to look over the rest of the trading week, including Weekly Jobless Claims, Consumer Sentiment, Wholesale Trade and more.
Outside Markets: Stocks are moving higher once again today, as the upside breakout in equities appears set to continue. Although gold and silver are seeing a nice bounce today, ongoing stock strength may potentially remain a significant hurdle to any sustainable upside momentum. That being said, some analysts are calling the recent rally in stocks overdone at this point, and a pullback would seemingly become more and more likely.
Crude oil is lower today, but is remaining above the psychologically important $50 per barrel level-for now anyway- although the market looks like it has some potential for rolling over.
The U.S. Dollar index is slightly lower today and although the greenback is not far from recent highs, the dollar has yet to be able to rally beyond those highs. Like equities, some analysts have called the recent rally overdone, and a pullback in the dollar would not be surprising.
Treasuries are on the rise today as investors become optimistic for more ECB stimulus.
The Big Picture: With ongoing strength in equities and a higher dollar, it is difficult to imagine a scenario in which gold and silver put together a lasting rally. That being said, however, physical demand along with bargain hunting may keep the markets stable near current levels. It is also entirely possible that precious metals see more buying interest after the Fed meets next week. While a rate hike appears to be a near-certainty, investors may focus their attention on what the central bank has to say regarding the pace of further interest rate hikes. A hawkish-sounding Fed could potentially fuel more selling while a more dovish tone could potentially motivate buyers.