Silver prices are slightly lower on Wednesday morning as stocks move slightly higher, crude oil prices are flat and the dollar index moves a tad higher.
The precious metals complex continues to suffer from lack of a bullish catalyst. Silver has been moving lower thus far this week as the bulls seem to fade on rallies. The notion of potentially higher interest rates, a higher dollar index and strong stocks are all taking a toll on silver and precious metals. Silver may now have its sights set on the $15.50 level, which may see buyers step into the market. On the other hand, a break below this support level could potentially set the stage for another significant leg lower in prices.
The ongoing situation in Greece could potentially prove to be the bullish catalyst that precious metals have been lacking thus far. The country is clearly running out of money-and running out of time. Negotiations between Greece and its creditors have yielded little in terms of results, and the window of opportunity to reach an agreement is closing by the day.
As the bailout extension deadline approaches, if no agreement is reached or at the very least in the works, panic could potentially set in. While no one knows for sure how a Greek exit from the EU may affect financial markets, there is the possibility of a sell off in global financial markets. Should this occur, it could possibly support the precious metals complex as investors may look to buy gold and silver for their perceived stability.
The “Fed” watch is also ongoing and could affect silver and precious metals as well. Ongoing debate surrounding the timing of a rate hike by the central bank may keep silver prices relatively range bound for the time being. Markets are looking forward to the non-farm payrolls data for April which could potentially tilt the Fed one way or the other. Following last month’s weaker than expected jobs data, another weak number may cement a decision by the Fed to hold off a bit longer on the first rate hike. On the other hand, should the data rebound in convincing fashion, the Fed may elect to go ahead and raise rates in either June or September.
While the potential for a rate hike is already priced into silver, should the dollar index resume an uptrend it may weigh on silver prices and cause more bulls to exit the market. That being said, it is also possible that the dollar index has priced in a hike, and that sideways trade being seen in the dollar recently could be indicative of a near term top in the greenback.