How Will Fed Speeches and Economic Data Impact Gold and Financial Markets?

Phillip Streible, Chief Market Strategist

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Good morning, it’s Wednesday, February 7th, about 6 a.m. Central Time. Overnight, the precious metals are weaker after yesterday’s small rally. You have April gold down $12.50, March silver down 11 cents at 22.36, March copper down 1 at 3.77, and April Platinum down 9 at 901. So, yesterday we did have Fed speaker Mester come out; she indicated that she’s in favor of cutting rates towards the second half of the year. The ironic thing is that she’s planning on leaving her post in June, so kind of putting it off onto someone else. We’ll have to see who replaces her as the next voting member. It’s probably already picked out, but we’ll have to look and see what that information is. What I generally do is I’ll take a list of the voting members and, you know, when they’re speaking, and I’ll write down in highlight what their last sentence was, their last major kind of bullet point on how they are with raising or cutting rates, what their main focus is, and then if they’re hawkish or dovish, and then how far they lean.

So, we do have a couple of things coming out today. We have the trade balance data at 7:30, hasn’t really moved the markets too much, but then you get a series, another series of, you know, Fed Governor Cougler speaks, Boston Fed President Kin speaks, and then Richmond Fed President Barkin, that’s an FOMC voter, that’ll be at 11:30 Central. That’s the one you really want to pay attention to. And then at 1 p.m., you’re going to have Fed Governor Bowman will also speak. Those are the two you’re going to want to watch; those are the two that’ll move some of these markets just a touch here.

So, a little bit more news on that New York Community Bank, it was downgraded by Moody’s. Moody cited now concerns with management, and they’re also monitoring the liquidity. So, part of the issue is that they have regulated real estate, and if you look at it like you’re a landlord in New York City, property prices are high, but you can’t increase the rent as much as in a traditional market. It’s capped for affordability issues, so in a rising interest rate environment, that’s where it really creates this liquidity crisis and causes these problems to occur. So, we’re going to want to continue to monitor this type of situation and see if more banks come to light.

Now, things that we’re looking at here today on the gold market, obviously, it’s going to get some tailwinds from the pace and depth of the interest rate cuts and also the timing of it, and it seems like they’re being pushed out to May and June. So, short term, you’re going to get these little Fed speakers and these economic data points and things like that, and what it’ll do is it will look at the Fed’s forward rate path, and it’s going to drive short-term price action, but we all know in the long run that the rate cuts, the geopolitics, the central bank buying, remember, and also ETF flows, those are what’s going to be the biggest impact on the gold market. So, you got to watch these little ripples kind of throwing you off; this where position sizing, specific contract months, things like that, really come into play.

Now, other outside markets that we have been looking at, I believe the dollar index, small short-term peak in the market here, about that 104.50, 60-70 area was that top. I think prices, I don’t believe that we’re going to break down into a bearish trend at all, but I do think that like testing back in the 103.50 area, that’s kind of a key level of support there that we’re going to monitor and also give a small little boost to some of these other assets like gold, like silver, like platinum.

So, gold trapped in a range here, 2073, that’s your breakout point to the upside. You’re going to have to see everybody chase if we get back above there. On the downside, that support’s from 2032 down to 2027. Now, looking at the equity markets, under a touch of pressure here today, what I generally, I’ll do is I’ll look at the Dow Jones, and people hate the Dow Jones because it’s small, it’s archaic, and this and that, but it gives you a pretty diversified group of stocks. And what I’ll do is I’ll quickly click through the charts of all of them, all 30 of them, real fast, and I’ll look and see, are they making higher highs, are they making lower lows, how many of them are breaking out, how many are breaking down, and what you’ll see is that you’re seeing a series of lower highs and lower lows, that most of these stocks had peaked on December 27th, they made a lower high on June 30th, and that less stocks are making higher highs. So, it’s called the breadth of the market here, so fewer stocks are above the 200-day moving average and fewer stocks are above the 50-day moving average. A lot of times, you’ll see individual stocks roll over first, and then you’ll see the indexes roll over. I’m saying we’re going into a bear market. What we’ve looked at historically on an election year is you go from January to March, and the market chops around there, and then from March on, candidates really push their agendas, and they try and, you know, pad the economy, and that’s where we get that normalized return on election year of about 7.5% US equities. So, we want to just keep an eye on things like that, we want to look at, you know, adding on weakness, letting some go at some of these resistance points, and playing short-term turnovers like what we’re getting right now.

So, other markets here, Bitcoin, great day here yesterday, funds continue to flow into the ETFs. The crude oil market kind of bumping back up a little bit, it doesn’t look like there’s any ceasefire or anything like that. So, want to keep an eye on the dollar, Fed speakers, we’ll get more economic data here as the week goes on. You got any questions, give me a call, love to talk to you, 312-858-7303. Remember, futures and option trading does involve risk; loss may not be suitable to all investors. Good luck, good trading.

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