The silver market is trading slightly higher this morning in mid-week action. Stocks look set to open slightly higher this morning while crude oil and the dollar index are also moving up.
After moving above the $16 per ounce level for several sessions, the silver market is once again pulling back. Silver and gold have both been on the defensive since last week’s FOMC meeting announcement. Following their meeting on interest rates, the Fed added some language to their statement that could potentially hint at a December rate hike.
While many investors have been thinking that the Fed would likely hold off until sometime next year to initiate lift-off, the central bank is clearly leaving the door open for a hike next month. In fact, the added language to the central bank’s statement could be considered a warning to markets and investors that a hike is imminent.
Silver and gold may remain on their heels for the time being until the Fed actually does act. Once the Fed does hike, it will remove some of the uncertainty surrounding interest rates and could potentially pave the way for a more sustainable rally in silver.
While this week is very data-rich, investors may focus on Friday’s non-farm payrolls data for October. This report could also potentially impact the Fed and its decision regarding rates next month. Should another large miss be seen in this key report, the central bank may have reason to think twice about a hike next month. On the other hand, should the data come out in-line or better than expected, the Fed could see that as a green light to hike next month.
Although silver is currently falling on the notion of higher rates, there could potentially be a “silver” lining once the initial hike takes place. Stocks have been moving higher since volatile selling seen in late August and September. Stock investors, however, could potentially see reason to look elsewhere once rates start to go up. If equities begin to show weakness once again, investors could look for alternative asset classes in which to put capital to work.
With stocks currently rising as they are, it is hard to see a large rally in silver taking place. Silver and gold could potentially see one more test of the lows before finding a longer-term bottom. Should this be the case, another dip to $14.50 could potentially attract buyers in silver.