Market Overview: The metals markets are slightly firmer this morning as ongoing risk aversion keeps buyers interested. The complex appears to be in a form state of “buy the dips” for the time being, and may remain in such a state unless there is a major downshift in current geopolitical tensions. Gold is also benefiting from an increasingly bullish technical posture, and additional strength in the yellow metal may pull more buyers into the market.
Key Data Points: The latest figures on MBA Mortgage Applications showed applications for new home purchases rose by a seasonally adjusted three percent last week, while refinancing activity was unchanged.
Dallas Federal Reserve President Robert Kaplan will be speaking at an engagement later this afternoon. There will also be a 30 year bond auction taking place later today. This auction may be closely watched by investors, as demand for bonds has picked up recently and yields have declined.
Investors will get the latest readings on Weekly Jobless Claims, PPI, CPI, Retail Sales and more over the next two trading days. That being said, trading volumes may be light due to Good Friday and the upcoming Easter Holiday.
Outside Markets: The stock market is moving modestly lower today, and continues to show some potential signs of cracking. If current levels of risk aversion remain or increase, it is possible that more stock investors decide to book some profits and exit the market near current levels.
The dollar index is slightly lower today but maintaining trade above the 100 level.
The bond market is seeing a little buying today ahead of the auction. Interest rates have remained stubbornly range bound and have not been able to break down further as many have suggested in recent months. This could simply be another indication of some potential market volatility ahead.
The Big Picture: The metals may see ongoing buying interest and any significant dips appear likely to be bought at this point. There are a number of very serious geopolitical issues that need to be addressed right now. Although Syria and Russia may be largely dominating the headlines, it is potentially North Korea that could pose the biggest risk to the U.S. and even global financial markets.
Any further escalation in U.S./Russian tensions or U.S./North Korean tensions could potentially have a significant impact on financial markets and overall appetite for risk.