Silver prices are down about a nickel this morning in early trade as the dollar index moves higher and stock index futures are pointing to a lower open.
Silver and gold may potentially see benefit from recent central bank action in both China and India. Over the weekend, China cut interest rates in an effort to boost its economy. The Chinese Central Bank has taken further action today by lowering the interest rates charged to commercial lenders through a special short-term lending tool. The People’s Bank of China seems intent on staying ahead of the curve, and further easing measures may be seen in the near future. The Reserve Bank of India has also taken additional easing measures this week. Asia’s third largest economy lowered its policy repo rate by .25 percent, and this is on top of a cut already made in January. Will more global central banks take similar action? Is there a trend of weakening growth outside of the U.S.? Time will tell, but these stimulative measures may be seen as being bullish for silver and gold.
On the opposite side of the spectrum, the U.S. Federal Reserve will likely be raising rates in June or September. While the central bank may elect to wait longer, it does appear that the initial hike is not far off. While many have argued that this may be bearish for silver and gold, at this point it may actually drive buying in precious metals. The reality is that even with an initial hike, interest rates in the U.S. will likely remain low for some time. Precious metals markets appear to have discounted this initial hike, and it wouldn’t be surprising to see silver and gold move higher going into the hike or following the first hike.
Markets are looking forward to Friday’s non-farm payrolls data for February. Consensus estimates are looking for an increase of 230,000 jobs with the unemployment rate at 5.6 percent. This morning, the ADP jobs report came out slightly below expectations, and showed an increase of 212,000 jobs versus estimates of 220,000.
The bears remain in firm technical control. Silver prices have continued trending lower, and prices may reach the late December/January lows around the $15.57-59 area before finding more buying interest. On the upside, silver prices may see trend line resistance around the $16.50 level, and then additional resistance around the $16.70 level.
The dollar index starting another leg higher will likely continue to weigh on silver and precious metals, and the greenback has further room to run. On the other hand, the Greece/EU situation along with the ongoing Ukraine/Russian conflict may keep some safe-haven buying interest in the precious metals.