After performing decently through the first few days of the week, precious metals spot values have spent much of the day on Wednesday moving sideways to slightly lower. With a positive US housing report on the table today, it should come as no surprise that equities and the USD are beginning to once again trend higher. As we look ahead to the last few days of the week, I expect things to remain just as quiet and subdued as they have been through the first few days. Unfortunately for precious metals, however, a quiet market atmosphere will likely only see metals retain their bearish posture.
With such little economic data for investors to discuss and mull over this week, the attention of the market shifted yesterday to new conflicts unfolding in the Middle East. According to most major news outlets, Monday evening (US time) saw the US military begin launching air attacks against ISIS positions throughout Syria. Though Obama had made it clear a few weeks ago that he intends on using air power against ISIS positions in Syria, no one expected him to act so swiftly. As such, precious metals were given a boost on Tuesday, a boost stemming directly from safe-haven demand. It will be interesting to see how this situation unfolds over the coming weeks and months.
US Housing Data Comes Back Better Than Expected
Through the first few days of this week, a sub-par report on existing home sales in the United States during August ended up having a negative impact on the progress of the US Dollar and US equities. Today, however, all of that bad news was undone by a new home sales report that came back far better than anticipated. According to the report, new home sales in August were the best that they have been in more than 5 years. This news was surprising simply because no one was expecting the report to be upbeat, and even fewer were expecting it to be so drastically upbeat.
As a result, the USD Index came close to hitting a fresh 12-month high today. In addition, US equity markets performed well and continued piling the selling pressure on gold and silver. Unless some fundamental factor playing into the current market atmosphere shifts, I am afraid that metals may be under almost continuous selling pressure, especially considering that the market is expecting interest rate hikes to happen within the year.