Silver prices are slightly higher today while gold is seeing significant gains. The stock market is once again under severe selling pressure as concerns over China and falling crude oil prices take a heavy toll.
Asian and European markets were lower last night as the notion of deflation takes hold China remains a major source of concern as the world’s second largest economy continues to show signs of slowing. In addition, worries over capital outflows from China are making investors anxious as the departure of capital could exacerbate China’s current economic difficulties.
With global equity markets in a tailspin, investors could potentially seek refuge in other asset classes such as precious metals. While gold is seeing this flight to safety buying today, silver has thus far not enjoyed the same benefit.
This is likely due to the fact that silver is widely used in industry and a major economic slowdown could drive a decline in silver demand.
Silver prices have thus far maintained their trading range going back to December. The silver bulls have not been able to take prices higher and decisively out of this recent range. While this could potentially change quickly, silver may be weighed down by concerns over demand.
The economic data calendar in the U.S. is fairly light this week. Investors have seen the latest data on the Housing Market Index and MBA Mortgage Applications. Still to be released is Weekly Jobless Claims, the Philly Fed Business Outlook Survey, PMI Manufacturing, Existing Home Sales and Leading Indicators.
While this data will likely be watched by investors, China and crude oil prices are likely to remain the center of attention.
Crude oil prices slid to a 12 year low today as front month oil trades below $27 per barrel. The $20 per barrel crude oil target some have called for in recent months may be in play sooner rather than later. Some are now even calling for crude to hit as low as $10 per barrel before finding a bottom.
As long as the slide continues, equities and risk assets may have a difficult time finding any real support. Lower oil and other commodity prices will likely weigh on risk appetite until a bottom is reached. The selling may have a ways to go however, and lower equity and risk asset prices could potentially be seen in the coming weeks and months as investors remain in a defensive posture.