Silver is trading slightly higher today in very quiet trade as markets await the latest FOMC minutes and Ben Bernanke a little later this afternoon. The markets will closely scrutinize the minutes for any additional clues about the timing and/or extent of Fed tapering. Perhaps one of the biggest pieces of the puzzle that investors will be looking for today is some type of consensus among fed members. There are many different ideas still circulating about when the fed may begin to scale back and by how much.
Last week’s non-farm payrolls data certainly seemed to give the hawkish camp an edge. The metals reacted accordingly and silver prices sold off but did not make a fresh low. Looking at some of the other data, most of it continues to be positive however, some has been disappointing. This sort of “Mixed bag” has left others thinking that the Fed may have a little ways to go before scaling back. The bottom line is this: No one knows for sure. Hopefully today’s minutes will give some needed clarity. This release will likely be the single biggest piece of economic data for the week and certainly has the power to effect silver and other markets.
In other markets, some keys things have been developing that can have large effects on silver. The U.S. dollar index recently traded at a three year high. Mario Draghi of the ECB has made it clear this week that low rates are likely here to stay for the foreseeable future in the Euro zone, and that has kept pressure on the Euro.
Should the greenback continue to gain strength, it may make life difficult for the precious metals complex and could help contain any potential rallies in silver. The other market that may have an effect and is working in silver’s favor right now is crude oil. Crude oil continues to maintain prices above $100 per barrel and seems to be gaining strength. As crude oil prices rise, inflationary expectations may start to change. This could lend silver prices some support as the metal is often bought as a hedge against future inflation.
The unrest in Egypt is likely the biggest catalyst for higher crude oil currently. It is also likely putting a safe haven bid in precious metals. Should the situation begin to settle down however, crude oil and silver could start to work lower.
For now, silver is attempting to stabilize and build a base. The market seems comfortable for now around the $19.00 level. As discussed in previous posts, there remains a large short position in silver that may be unwound at some point causing higher prices. In addition, should unrest in the Middle East start to escalate, or should oil prices continue their march higher, the potential for a large rally in silver is certainly present.
This market update is provided weekly with analysis. You can always check spot silver price per ounce by watching our on-site charts.