Silver prices are trading flat this morning as equities and the dollar also trade sideways to begin the day. This week is very light data-wise due to it being shortened by the Martin Luther King Jr. Holiday on Monday. Tomorrow will be the only meaningful day of the week from a data perspective, and investors will get the latest readings on weekly jobless claims, existing home sales, leading indicators and PMI Manufacturing. It is quite possible that many market participants are holding out until next week’s FOMC meeting to see what if any action the Fed takes. Word is that the Fed will cut its bond buying by another $10 billion at next week’s meeting. With little economic data for investors to chew on this week, and the annual economic forum in Davos stealing some of the limelight, it seems that we may not see much market movement in silver or precious metals until next week.
Talk of additional tapering by the central bank has kept the precious metals at bay. More large banks have been lowering their 2014 forecasts for precious metals in light of the fact that the dollar has remained strong and the Fed is in the process of removing its stimulus. While many feel that this sentiment makes a lot of sense, there is also another camp that feels that perhaps now is the time to be buying. The precious metals complex has perhaps gotten overly bearish-and when too many people are on one side of the ship the ship usually capsizes. Another possible scenario is that we have not seen the bottom yet in silver or gold. One could argue that we may see another washout in prices before the metals get on more stable footing.
Although silver has not done much in recent weeks, it is looking a little bit more constructive from a technical standpoint. The bears remain in the driver’s seat but thus far have not been able to carve out a new, fresh low. Silver has also been making higher swing lows and this could be viewed as a positive. Silver prices must take out the January 14th high in the $20.67 area to get the bulls excited. The bears need to take out the most recent swing low on January 8th of $19.31 to get something going. Physical demand has remained robust but appears to be fading a bit now. We suspect that following the Fed next week we will have a more clear idea of where silver prices may be headed.