The silver market is relatively quiet today in early trade as investors digest recent gains in the metal and await further inputs. Following the recent upside in silver prices, a corrective pullback should come as no surprise.
Silver has a number of bullish factors working in its favor currently. Let’s begin with yesterday’s disappointing non-farm payrolls data. This let-down in the jobs data underscores the bigger issue of lackluster economic growth and a labor market that continues to struggle. Weakness in the economic data may force the Fed to hold off even more on its plans for tapering its bond purchases.
In addition to the data stream, markets are still faced with the ongoing budget crises and debt ceiling. Lawmakers have once again kicked the can down the road so to speak, but the debt ceiling will likely be dominating headlines again in the near future if a viable long-term solution is not found. Although stocks continue to rally, many feel that as the deadline approaches again we could see risk aversion set in among investors and that a flight to safety could take place.
Should this prove to be the case, gold and silver could stand to benefit as investors look for places to put cash to work. In either case, it appears that QE will be here until at least the middle of the first quarter of next year, and that will likely support precious metals for the time being.
The U.S. Dollar index will also likely have a large effect on silver prices. With lawmakers inability to come up with a long-term solution to the debt crises, and a data stream that still shows some economic weakness, the dollar is currently trading at the lowest levels since February. Should the dollar index breakdown below the 79 level, it could head sharply lower. This type of dollar weakness could give silver prices a huge boost and is something that should be monitored.
Silver is in a bullish posture right now trading above its key 9,20, and 50 day EMA’s. A next possible upside target is $23.435 while the 200 day EMA looms above at the $24 level. Good support is still seen at the $22 level, and this price level also now coincides with the 9,20,and 50 day EMA’s. The silver market is close to turning its shorter-term moving averages up on the weekly chart as well. Silver looks poised for more gains after some consolidation, and unless support at $22 is breached many investors may look to buy dips in order to try to catch a further upside breakout.