Silver prices are moving up this morning as gold trades slightly lower in mixed market action. Stocks are higher today, as is crude oil, while the dollar drifts higher.
The silver market found some footing earlier this week around the $14.50 per ounce level. Silver is seeing a little bit more of a push today as the bulls attempt to stop the market’s recent slide. Some bargain hunting, as well as short covering, are likely featured.
The main event in trading today will be the FOMC meeeting announcement due out this afternoon. As has been the case for several meetings now, investors will closely scrutinize the Fed’s statement for clues regarding its plans with interest rates. The central bank has reiterated that it intends to raise rates sometime this year, and it may reinforce that notion in its statement today. Some skepticism has appeared in recent weeks, however, given the turmoil seen in Chinese markets, as well as the ongoing uncertainty surrounding Greece. While Greece is no longer dominating headlines as it did several weeks ago, there is doubt about its ability to enforce the terms of its bailout. China is the focus of doubt, as well, as some are now wondering if recent, aggressive steps taken by Beijing will be enough to halt the sell off seen in recent weeks in Chinese equities.
Nevertheless, the Fed may stay the course, with many analysts believing that the initial rate hike will come as soon as September. The question now really becomes whether or not the precious metals complex has fully discounted such a move. While silver may have found some degree of equilibrium at current levels, gold may continue to see further downside on a rate hike before finding a bottom, and may drag silver down along with it.
Should the Fed sound hawkish, it may potentially weigh further on silver and gold, while potentially boosting the dollar. On the other hand, if the Fed takes a more dovish tone in its remarks, it could potentially fuel a sizable short covering rally in the metals complex.
Demand for physical silver has remained quite robust, and it appears that bargain hunters and long-term investors are more than happy to acquire more of the white metal at current price levels. This physical demand has been counteracting bearish market forces in recent trade. That being said, the silver bulls have a great deal of work to do to gain some bullish momentum. From a chart perspective, the path of least resistance remains lower and any significant rallies in silver may be sold into.
While a significant move lower in silver cannot be ruled out, physical demand at current levels, along with ongoing uncertainty surrounding Greece and China may keep the metal from falling too much further in the near-term.