Market Overview: The metals are a mixed bag in early action this morning, with gold moving slightly higher while silver moves slightly lower. These markets are likely seeing a little bit of consolidation and profit taking after recent gains. Investors are still digesting yesterday’s heavy losses in the stock market, as markets have not seen a drop of that magnitude since October. With the numerous issues that the Trump administration is currently dealing with, any tax reforms are likely some time off, and any fiscal spending plans could also potentially be delayed. This could potentially keep an ongoing bid in the metals.
Key Data Points: The latest reading on MBA Mortgage Applications showed a decline in both new home purchase applications as well as refinancing applications. This may be due to the recent move higher in rates, which are at their highest level since April 2014.
The latest reading on Existing Home Sales is due out later this morning.
Investors will still have plenty to chew on the rest of the week, as Weekly Jobless Claims, New Home Sales and Durable Goods Orders are set for release. There will also be numerous Fed officials speaking at various engagements.
Outside Markets: Attention may now turn to the stock markets, which yesterday suffered their worst daily drop since October. After failing to make fresh all-time highs, the market traded sideways until yesterday’s breakdown. This could potentially mark the beginning of the end for the Trump rally.
The new administration is dealing with many issues, including the healthcare bill, tax reform plans and the ongoing scrutiny over potential ties with Russia. Investors may be realizing that tax cuts and fiscal spending are not likely to arrive as soon as expected, and this may be giving them reason to cash out at this point.
Interest rates have been on the decline in recent days following the Fed’s decision to stay with its forecast of three rate hikes in 2017.
The Big Picture: The long awaited major pullback in stocks could potentially be getting underway. As concerns over the new administration mount, investors may become more prone to cashing out after recent months of gains. This could potentially keep the metals markets well-supported, as much of that capital would then be put to work in other areas. Gold is not far from its recent highs at this point, and it is looking like the bulls will challenge and perhaps break out above those highs in the coming days.