Gold: $1,296.13 -0.92
Silver: $17.33 -0.08
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January 21st Mid-Week Market Update
Article By: Rob Pacelli on January 21st, 2015

Silver prices are moving slightly higher this morning as gold has reversed course lower and stocks are mixed. The dollar index is lower today while oil prices are moving moderately higher.

This week has featured housing market index data as well as housing starts figures. Tomorrow, investors will get the latest readings on weekly jobless claims as well as the EIA Petroleum report. Friday will finish off the week with PMI manufacturing data, existing home sales data and leading indicators.

Of particular interest this week will be tomorrow’s ECB meeting. Word is that the central bank will look to try and boost the region’s economy by injecting 50 billion euros per month ($58 billion) in quantitative easing until the end of 2016. Some economists expect ECB President Mario Draghi to announce a 550 billion euro ($636 billion) QE program.

The decision will be discussed today, and changes could be made prior to tomorrow’s announcement. While many seem to expect a further rally in stocks based off such a move, it remains unclear if equities will consider this good news. In fact, this move by the ECB has been anticipated for some time, and may be already “baked into the cake.”

In other news, the Bank of Canada cut its key interest rate to .75 percent, a historic low. The bank cited the drop in crude oil prices as the source of weaker growth and falling inflation. In addition, the Bank of Japan cut its inflation outlook, also citing lower crude oil prices.

Precious metals have seen renewed buying interest in recent weeks. This could be attributed to several factors including risk aversion and asset reallocation as the new year gets under way. In addition, the lack of inflation in the U.S. could potentially keep the Fed on hold for longer than expected before hiking rates.

The technical posture for both silver and gold has improved significantly in recent weeks. Silver appears to have made a meaningful bottom back in December on high volume. The white metal has been trending higher since that time, and has breached some key resistance levels along the way.

The $18.50 area is near-term resistance, and was touched by prices earlier in the session.

How the dollar reacts to the ECB announcement tomorrow could potentially have a big impact on silver prices. While the euro currency may fall further based on the size and scope of the QE package, this too may already be a foregone conclusion. In fact, once the announcement is over, the euro could potentially begin to stabilize. Should profit taking in the dollar ensue, the precious metals complex could potentially stand to see additional fresh buying interest.