Surging USD Sparked Precious Metals Sell Off

Precious metals ran into a surging USD yesterday and as a result sold off sharply. While gold fell below the 200-day moving average at $1,216.00 and the 100-day average at $1,212.00, it did hold $1,200.00 which was a victory of sorts. Silver took a pounding and fell below $17.00, but as it has done so many times it rebounded on the back of a pick up in physical demand.

Yesterday’s surprisingly strong U.S. economic data came from housing starts which surged to a seven-year high. While a shocker, it may have been the result of builders locking in loans and beginning construction before rates move higher. This will be a closely watched economic release in four weeks, because if housing starts remain strong it will increase the likelihood for a rate hike by the FOMC in September. This morning finds gold and silver continuing to bounce but volume is light as we trade at $1,211.00 and $17.25. All eyes will be on the FOMC minutes which are scheduled to be released at 2:00PM EST. Comments about sluggish Q1 growth and expectations for Q2 should provide the hint for the FOMC’s plan for interest rates.