Market Overview: The silver market is seeing a nice bounce higher today following several days of drifting lower. While silver looked vulnerable to a larger pullback, today’s price action may squeeze some shorts out of the market and silver could potentially return to recent highs. Some short covering and position squaring is also likely being seen today ahead of this afternoon’s FOMC meeting announcement. Speculation on the central bank’s plans may drive precious metals in the near-term and some analysts feel that the Fed is unlikely to raise rates at all this year.
Key Data Points: MBA Mortgage Applications this morning showed a decline of three percent for the week of July 22nd. Refinancing activity saw a significant decline of 15 percent. Two consecutive weeks of declines and a slight bounce higher in mortgage rates just goes to show that the housing sector remains somewhat fragile and is largely dependent currently on extremely low rates.
Durable Goods Orders were weak, registering a decline of four percent. This reading was below consensus estimates and underscores some weakness in the sector.
The Pending Home Sales Index showed a very modest gain of .2 percent. While some degree of volatility has been seen in housing data, the overall trend in housing sales remains modestly higher.
The FOMC meeting announcement today could potentially drive volatility in markets. While no action is expected from the central bank today, any clues as to the timing and pace of any additional rate hikes could potentially move markets.
Outside Markets: Stocks are slightly lower today in what is likely some profit taking and position squaring ahead of today’s Fed meeting. Equities have been moving mostly sideways in recent action, and could be showing signs of a near-term top.
Crude oil is lower today and is once again pushing back towards the $40 per barrel level. Ongoing declines in crude may be a negative for stocks and could increasingly weigh on equities.
The dollar index is slightly higher in early action today and appears poised for further upside. Of course, any dovish talk from the FOMC today could potentially drive a reversal in the greenback.
The Big Picture: Whether or not recent price action in silver proves to be nothing more than another buying opportunity remains to be seen. Silver will likely be driven by the Fed’s plans regarding rates and overall risk appetite or aversion. With the central bank possibly holding rates lower for longer, the path of least resistance for silver could potentially be higher. A move above the recent highs could also attract more buying interest, and silver could potentially make a run to multiyear highs.