Market Overview: The metals are a bit lower in early action on Wednesday as risk aversion is receding-for now anyway. Investors appear to be looking over their shoulder right now but do not appear to be overly concerned. Recent saber-rattling by North Korea and tough talk from the U.S. has been a little quieter as the midpoint of the week arrives. Needless to say, however, this situation is one that can flare up again at anytime, and could potentially send shockwaves through global financial markets. Investors will also be closely monitoring U.S./Russian relations as the recent U.S. military strikes in Syria have fueled a rise in tensions between the two nations.
Key Data Points: The latest data on MBA Mortgage Applications today showed a decline in new home purchase applications while refinancing activity showed a slight rise. Mortgage rates have been on the decline in recent weeks, and further declines could fuel more activity.
This afternoon, investors will get the latest data on the Fed’s Beige Book. Given some recent dovishness from the central bank, investors may pay close attention to this report to try to gauge the path of interest rates. Although a June rate hike still remains likely, there are a number of issues that could potentially keep the central bank on hold.
Outside Markets: The stock market is headed higher today as appetite for risk is on the rebound. Although the stock market has not been able to make fresh new highs yet, it has also not seen a significant breakdown yet either. The market appears to be range bound right now, and has yet to tip its hand.
Bond prices remain elevated (although lower today) which may be indicative of underlying risk aversion and/or an increasing opinion that the Fed will not be as aggressive with rate hikes as previously thought.
The dollar index remains below the key 100 level, and further declines could potentially be bullish for the metals complex.
The Big Picture: The metals remain in “buy the dips” mode until proven otherwise. Current geopolitical tensions with Russia, Syria and North Korea are not likely to fully abate any time soon, and such tensions may weigh on the equities markets while being supportive for the metals complex and other perceived safe havens.
Investors are also awaiting to see the implementation of key policies the Trump administration campaigned on such as tax reforms and fiscal spending.