Silver prices are moving slightly higher during early trade on Wednesday. Stocks, along with the dollar index, are both moving lower while crude oil prices are slightly higher. These factors could potentially be lending some support to silver and the precious metals markets.
In overnight news, the World Bank cut its growth forecast from 3.2 percent to 2.8 percent. This news may cause a bit of a drag on equities today, and also may slightly deflate the euphoric balloon being seen in stocks currently. This could potentially give gold and precious metals prices a lift should investors begin to worry more about the health of the economy. In addition, as we have stated for some time, should stocks start to falter then we could potentially see a return to other asset classes such as silver and gold. The World Bank forecast may also pave the way for central banks to keep their feet on the gas pedal with regards to stimulus and low rates. This could also potentially give precious metals a lift.
The silver market is obviously in need of some type of bullish catalyst. The precious metals have had a number of things working against them in recent months including but not limited to stock strength, dollar strength and the Fed. The dollar index has been of particular interest in recent days following the ECB decision to introduce a negative deposit rate in order to try and combat slowing growth and deflationary pressures. Additional dollar strength would be a silver negative.
On the flip side of the coin, however, crude oil prices have clearly broken out to the upside. Higher oil may potentially boost silver as investors get more wary about inflationary pressures. All in all, however, it seems like the stock market may hold the key to the silver market. Should we begin to see a rotation back into precious metals and other asset classes, metals prices could potentially move significantly higher and do so quickly.
Also of great importance right now is the fact that silver prices have reclaimed the key $19 level. Silver has staged what thus far appears to be a false downside breakout below this key level, and once again the market appears comfortable in its prior trading range. The $20.50 level remains key resistance on the upside. Should that level get decisively taken out to the upside, the market could move sharply higher. $19 will continue to be watched on the downside. Whichever way the silver market ends up going, the potential upside and potential downside could be swift and severe.