Silver prices are trading slightly lower this morning in uneventful trade thus far. Today is light in terms of economic data and perhaps the biggest single event of the day will be a town hall meeting that Ben Bernanke is participating in later this evening. There was simply not much to report from the overnight session either. The only real highlight of the overnight session was the Chinese Communist party meeting being wrapped up with no real discussion on economic reforms.
The precious metals complex will likely remain hostage to the Fed for the time being. By this we mean to say that the market is likely to remain focused on the Fed and its potential tapering in the near future. Any clues given in the meantime as to the timing and extent of the taper could drive price action in precious metals.
The dollar index continues to stay strong following the rate cut by the ECB last week. Although the dollar has not been able to break out above its 200 day EMA, it continues to hover around this level and the longer it does so the more likely that it takes out this overhead resistance. The silver market will be watching the dollar closely, as another leg higher in the greenback would likely be a large drag on precious metals and commodities in general.
Silver prices remain in a bearish technical posture and continue to hover around the recent swing lows. The lows in the $20.49 and $20.63 regions which were reached the first day of October and then on October 15th are acting as support for silver currently. These levels also coincide with the previous trading range in silver from July to August.
This area could prove to be very key support in silver prices if it holds. Thus far it has, but the longer silver remains down at current levels the more likely it tries another downside leg. Silver is trading below its key moving averages currently, and the bears have once again established momentum. Prices must get back on some solid footing above the $21.33ish level in order to trigger some short covering and perhaps fresh buying.
Physical demand will likely be key here for silver and metals. With the metals complex sitting on its hands for now, solid physical demand could be the spark that drives prices higher again and gives the bulls another chance to take prices higher. If physical buyers are content to wait and see however, silver could be in for a rough ride and may trade sideways to lower for the foreseeable future.