Market Overview: Investors are digesting last night’s Presidential address to Congress. The President’s remarks seem to have been considered far more “Presidential” and investors appear to be feeling quite optimistic this morning. Gold is likely seeing some decent profit taking after hitting multi-month highs in recent action. Also likely weighing on gold and silver prices is some recent hawkish Fed talk. Recent commentary from some central bank officials has driven odds of a March rate hike significantly higher. In fact, some now believe that a March rate hike from the Fed is likely.
Key Data Points: MBA Mortgage Applications this morning showed a rise in both new home purchase applications as well as refinancing activity.
Personal Income and Outlays showed inflation up a sharp 3/10ths of a percent to 1.9 for the PCE price index. This is the strongest reading in several years, and points to rising inflationary pressures.
The PMI Manufacturing Index showed a reading of 54.2.
The latest readings on ISM Manufacturing and Construction Spending are due out a little later this morning. The Fed will also be releasing its Beige Book later this afternoon. There is also various Fed officials speaking at various engagements today.
Outside Markets: Stocks are cheering on last night’s Presidential address, with the broad market S&P 500 up over 20 handles.
Bonds and notes are being sold heavily this morning, as rising inflationary pressures and the notion of another rate hike likely take a toll.
The dollar index is up sharply this morning and is within striking distance of the 102 level. Although the dollar has yet to challenge its post-election highs, it could potentially be on the way to doing just that.
The Big Picture: Investors seem to be feeling more optimistic, for now anyway, following last night’s address. Markets are likely to remain moving higher on economic optimism, but at some point will also likely want to see further action being taken.
Rising expectations for another rate hike from the Fed are also likely playing a role in the selling in gold and silver today, and may potentially put the brakes on the recent rally. Unlike gold, however, silver may potentially stand to benefit from a boost in fiscal spending and increasing industrial demand. If nothing else, the white metal may not see as much selling as gold potentially could.
Given many of the remaining uncertainties surrounding the Trump administration and its policies, some degree of risk aversion may remain present in the marketplace and could potentially keep a floor under gold and silver prices.