It’s all about the Fed today … Thus far, silver and the precious metals complex are showing little reaction to the release of the FOMC policy statement released just a short time ago.
The central bank appears to be content leaving its options open for the time being. The language and tone of that language did not seem significantly different from other recent FOMC meetings. The Fed did reiterate that it believes that economic conditions will continue to improve with appropriate accommodation. The Fed also reiterated that it believes that labor market conditions will continue to move towards levels consistent with its dual mandate.
Essentially, the FOMC announcement today seemed to further reinforce the notion that the Fed will remain data dependent with regards to any decisions on interest rates. While this is simply more of the same, it does leave the possibility of a summer rate hike open.
Investors will likely closely scrutinize the data stream over the next several weeks. Recent data has shown some ongoing difficulties, and last month’s non-farm payrolls report only reinforced the notion that perhaps the economy is just not ready yet for higher rates. This will make the non-farm payrolls data for April that much more important. If the data is solid, that may potentially be seen by investors as an all clear for the Fed to hike this summer. On the other hand, if the data is a large miss again, it could possibly keep the Fed on hold for the foreseeable future.
The dollar index is moving sharply lower today, and the bulls appear to be fading further. Dollar strength has likely been a contributing factor in silver’s lack of upside in recent months, and should further weakness set in it could potentially drive buying in silver and gold.
Silver does appear quite comfortable in its current trading range, however. The metal seems almost intent on maintaining trade between the $15.50 and $17.50 levels. The precious metals complex could potentially stay range bound for some time as ongoing debate over the timing of rate hikes continues.
The metals also seem to be simply lacking any significant bullish catalyst at this point. While the potential for a Greek exit from the EU remains in play, the last few days of negotiations seem to be finally bearing some fruit. If Greece is able to resolve its issues with creditors, it is quite possible that the equity rally will continue full speed as investors remain hungry. Should this be the case, silver may see lower to sideways trade for some time.