Market Overview: Both gold and silver are seeing some selling pressure today as better-than-expected economic data takes a toll and as the idea of an impending interest rate hike likely also weighs on the markets. Both gold and silver are well off of recent highs, and these markets appear to be rolling over. If the data stream remains strong and economic optimism remains elevated, the metals could potentially see ongoing selling pressure.
Key Data Points: The latest reading on MBA Mortgage Applications today showed a rise in both new home purchase applications as well as refinancing activity. This could potentially be due to the fact that the Fed is getting ready to lift rates again and more homeowners may be scrambling to refinance before rates rise further.
The ADP Employment report blew the doors off of expectations today. The report showed a rise of 298,000 jobs last month, well above and beyond consensus estimates of 183,000. This could potentially point to a very strong February non-farm payrolls report, although the the two reports have seen some divergences in the past.
For Friday’s Employment Situation report, consensus estimates are looking for an addition of 195,000 jobs and an unemployment rate of 4.7 percent. A strong number will almost certainly guarantee a Fed rate hike at its meeting next week, which already seems to be a foregone conclusion.
Outside Markets: Stocks are up slightly this morning, as some investors may be awaiting Friday’s jobs report and the FOMC meeting next week.
The dollar index is moving higher on today’s jobs data, and could potentially challenge its post-election highs in the near-future.
Bonds and notes are being sold heavily again today as interest rates are on the rise.
The Big Picture: The gold and silver markets are going to be tested with the upcoming rate hike and with better-than-expected economic data. Thus far, these markets are clearly losing some strength, although at some point bargain hunters are likely to emerge. The current “risk-on” mentality is likely to remain in place for the time being, as investors await new policies from the Trump administration.
Better data, rising stocks and rising rates may keep any further gains in the metals limited without a fresh bullish catalyst.
Rising inflation may potentially keep a bid in the metals, as well as the potential for government headline risk and a showdown over the debt ceiling.