Silver prices are steady and moving slightly higher today as investors await the outcome of the FOMC meeting this afternoon. Markets appear content to wait and see what the Fed has to say today. Not only will the FOMC statement be released, but the Fed meeting will also be followed up by a press conference in which Fed Chairwoman Janet Yellen will give her comments. It is expected that the Fed will continue on its current course of action and taper its bond purchases further. It seems that the Fed has made it pretty clear that they want to be out of the QE business, and will likely continue moving forward on its tapering plans. Perhaps more importantly today, investors will be listening to Ms. Yellen’s remarks closely for clues on future central bank action. In addition, investors will be looking for the Fed’s assessment of current economic conditions.
The ongoing civil war in Iraq continues to be a concern for global markets. Although we have not seen any degree of panic set into markets as of yet, should the situation continue to escalate we could potentially see investors enter a “risk-off” mode. Crude oil prices are holding comfortably above the $100 mark and if further violence is seen crude oil prices could potentially spike to $110 and beyond very rapidly. This could potentially create a “domino” effect as investors get more and more anxious over higher crude oil prices and uncertainty surrounding the region.
The situation in Ukraine could also potentially drive silver prices and perceived safe-haven assets. The conflict appears to have entered a new phase as Russia has now cut off natural gas supplies to Ukraine. Although the situation has been relatively quiet, economic pressures could spill over into other regions and affect global markets. This situation does not appear to be resolvable anytime soon.
Silver may see some decent support for the time being as these potential geopolitical powder-kegs play out. In addition, higher oil may lead to inflationary fears and give metals a boost. Silver has been trending higher in recent weeks, and looks poised for further upside at this point. The bulls likely need to take prices above the May highs in the $20 area to attract more buying and force further short covering. The $20.50 level would then likely become the next near term target. A break above this level could potentially send silver prices sharply higher as larger buying may be seen and more technical buyers enter the market.