U.S. Equities, U.S. Dollar, and Precious Metals All Trade Lower on the Day

U.S. citizens await the yearly presidential speech, the State of the Union, as U.S. equities, the U.S. dollar, and the precious metals are trading lower on the day.

As of 3:45 PM Eastern standard time, the Dow Jones Industrial Average is trading off roughly 300 points on the day. This is 100 points from the intraday low, but with 15 minutes left in trading, it is widely anticipated that U.S. equities will sustain a loss of over 1% on the day.

At the same time, precious metals are trading under pressure with gold futures currently trading at $1335.90, which is a net decline of $4.40 on the day. This all occurs in light of a weakening U.S. dollar which is trading fractionally lower to be currently fixed at 89.08.

Spot gold is also trading under pressure, currently fixed at $1336.70, which is a net decline of $3.20 on the day.  According to the Kitco Gold Index, today’s loss is composed entirely of selling pressure, which is accounting for a drawdown of $5.50 on the day. A weaker U.S. dollar is providing support for gold, adding $2.30 of value per ounce.

On a technical basis, the recent selling pressure displayed in gold is significant in that it occurred at the same price point of last year’s high. This created a double top on the charts. Based on our current studies, if gold prices break below 1335 on a closing basis we could effectively see prices to drift to $1310.

At the same time, it must be noted that this market has been moving on fundamentals, and the upcoming events will undoubtedly shape market sentiment regarding U.S. equities, the dollar, and precious metals.

This month’s FOMC meeting began today and will conclude tomorrow. Naturally, analysts and traders will look at tomorrow statements to take the current pulse and disposition of the Federal Reserve. Noteworthy is the fact that this will be the last FOMC meeting led by Janet Yellen as she hands the reins of power over to the new chairperson.

On Friday, the U.S. Labor Department will publish its monthly jobs report, which will be the most critical data set this month.

However, these events might pale in comparison to the fireworks that we could see next week when the current deadline to fund the government comes to a head on February 8.

How the current administration, as well as the House and Senate, deal with funding the government will absolutely affect the financial markets. If the powers that be come to an impasse or merely kick the can down the road, we could see more downside pressure in U.S. equities as well as the dollar. This could also provide alternative safe haven assets with an increased bullish sentiment.

Of course, the opposite is also true in that any real progress in tackling the current budget deficit, legislation on the table, and the continuation of funding the government could reignite U.S. equities and put bearish market sentiment on the precious metals.

Inasmuch as we all hope for the real progress to occur next week, if past performance is any indication, it seems more likely that they will come to some sort of impasse or once again play kick the can.

Wishing you as always, good trading,