Gold: $1,288.11 -4.56
Silver: $17.07 -0.10
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October 15th Mid-Week Market Update
Article By: Rob Pacelli on October 15th, 2014

Silver prices are trading just slightly higher as of this post and are not far from unchanged. Silver, like many other markets, has seen some volatility during today’s session. Silver has seen nearly an $.80 range today, and there is a lot of day to go.

Where is the inflation? That is likely a question that many are asking themselves right now. This morning, the release of the Producer Price Index showed that producer prices did not rise at all and in fact turned negative. Consensus estimates were looking for a slight rise of .1 percent while the actual number came in at -.1 percent. The fact that inflationary pressures remain so contained gives the Fed the wiggle room needed to keep rates at very low levels. The fact that inflation has not picked up at all, however, may be a cause for concern. This would seem to indicate that the economy remains quite fragile and that policy accommodation may be necessary for some time.

The steady drop in energy prices is also a cause for concern. Crude oil prices have hit their lowest levels since 2012 based on demand forecasts. This significant drop in oil has certainly had an effect on the stock market as well. While precious metals such as silver may potentially benefit from higher oil prices as concerns over inflation set in, lower oil could also potentially benefit metals as investors look for alternative hard assets to put capital to work in.

The rise in bond and note prices today and the corresponding drop in interest rates could work in silver’s favor. Silver and precious metals have been hit in recent months as the notion of rising rates took hold. Judging by the price action in treasuries today, it seems that perhaps many have gotten the trade wrong. Shorts covered causing a significant rally in treasuries today and that could potentially be indicative of underlying strength in the complex. All in all, it appears that the markets are feeling more dovish once again and that could potentially fuel buying in silver and metals.

Silver remains on a slippery slope from a technical standpoint, however, the bulls are showing signs of life once again. After trading as low as the $16.60s recently, silver has seen shorts cover and some fresh buying enter the market. While silver did complete a bearish descending triangle pattern recently, things are changing from a fundamental standpoint. Greece is back in the news with rising yields and concerns over the Euro zone are growing quickly. The uncertainty surrounding Greece and other EU members could potentially cause safe-haven demand in silver and precious metals as stocks see potentially more volatility and perhaps more downside.

That being said, the silver bulls have their work cut out for them as the market will likely need to climb back above the $19 level to attract significant buying interest.