Market Overview: Silver prices are slightly higher in early trade while gold is moving slightly lower. Further weakness in gold may weigh on silver while recent stock market strength could also deflate any safe haven bid. Price action in silver this week has thus far been quiet, and the market could potentially stay relatively subdued going into the long Memorial Day holiday weekend.
Key Data Points: MBA Mortgage Applications was released this morning and showed purchase applications rising five percent week-over-week. From a longer-term perspective, home purchase applications are up 17 percent from a year ago in another encouraging sign of improvement in the housing market.
The FHFA House Price Index was also released earlier in the session and showed a gain of .7 percent, exceeding analyst expectations of a .5 percent gain. The year-on-year reading registered a gain of 6.1 percent. While home values had been flat, recent signs are pointing to some upside momentum as the sector strengthens.
PMI Services Flash this morning did not meet expectations as the indicator registered a reading of 51.2 while the prior reading reading registered a reading of 52.1. A reading of 50 is considered the breakeven between expansion and contraction.
Outside Markets: Stocks are higher once again today, with the broad market SP500 approaching the 2100 level and previous all time highs. Stocks have covered some significant ground this week as the initial shock over a possible rate hike by the Fed next month has apparently worn off.
Likely adding to the bullishness in stocks right now is the ongoing move higher in crude oil prices. Crude is hovering just below the $50 per barrel level, and a break above could not only drive more buying but could also provide a collective sigh of relief that the worst of the declines are over.
The dollar index is slightly lower today, and could be taking a breather before more potential upside. The greenback has been moving higher after a false breakdown earlier this month and could potentially continue to climb if the Fed does in fact hike rates next month. This recent dollar strength is likely having a large impact on gold and silver, and could potentially keep nearterm upside limited.
The Big Picture: Silver is looking far more vulnerable to further declines as the notion of higher rates and a stronger dollar take their toll. In addition, higher stocks and strong appetite for risk are not doing the silver bulls any favors. Silver is approaching a level that may provide some key support, and a breakdown below this area could potentially see silver start a fresh leg lower.
Silver may find adequate support around current levels of $16.31 per ounce and could see a bounce higher. That being said, the “buy the dips” mentality seen in gold and silver in recent months is certainly being tested.