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Despite the continued run higher in crude oil yesterday, which broke above $54.00, gold and company continue to be most heavily influenced by the USD. Following the weak employment report on Friday, precious metals spiked higher as the USD weakened with the Euro trading above 1.10 as gold took a run at $1,225.00. By the close yesterday, the USD had regained much of the recent loss and gold was testing support as it closed in on the 50-day moving average at $1,205.50. Silver was unable to hold above $17.00 and will now look to hold support on either side of $16.60 where the 50- and 100-day averages currently reside. Following recent dovish comments by several FOMC members, it is difficult to see a rate hike in June, which should lend support to our market.
At this point the focus likely shifts to economic data that may or may not support a hike in September. Yesterday, Minneapolis Fed President Kocherlakota made a case for rate hikes not beginning until the second half of 2016 with a goal of the Federal Funds rate not reaching 2.00 percent until the end of 2017. While he is likely to be out voted by his peers and rates will move higher sooner than that, his comments could be indicative that the FOMC is growing increasingly concerned about the U.S. economy. We will get a better handle on the FOMC’s views later today when the minutes from last month’s meeting are released. This morning is off to a quiet start with all four metals probing lower on light volume.
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