Silver prices are seeing a little bit of upside today as a disappointing ADP jobs number and the U.S. government shutdown weight on investor sentiment and boost the appeal of perceived safe-haven assets. Let’s start with the ADP data. The private sector jobs data released this morning was a let down as according to ADP the sector added 166,000 jobs while consensus estimates were for a gain of 180,000 jobs.
As if that wasn’t enough, ADP added insult to injury by revising the August number of 176,000 jobs added down to 159,000. For all practical purposes, it appears that job growth is definitely slowing. Is the slowdown dramatic enough for the Fed to hold course and put tapering off further? It could be. It is likely that the slowing trend in jobs growth would not on its own derail any Fed plans for the immediate future however, when combined with a government shutdown things get a little more dicey.
What makes this whole situation even more unusual and potentially risky for investors is the fact that the markets may not get to scrutinize the U.S. department of labor’s jobs data on Friday as would usually be the case. If the government shutdown is not resolved, the data will not be released leaving investors wondering about the data and whether it is soft like the ADP data.
Speaking of the shutdown,one has to wonder how ugly things could potentially get in risk assets if this thing is not resolved very soon. In addition, with the debt ceiling fight looming in two weeks, things could get very nasty very quickly if a solution is not found by leaders. This could lead to safe-haven buying in precious metals and other perceived safe-haven assets. Thus far, the metals do not appear too concerned over the situation, but as the clock ticks we expect this could change dramatically.
Should the data in addition to jobs show any signs of softness, it could also spark metals buying. The U.S. dollar index could potentially work lower as the likelihood of the Fed refraining from tapering increases, and silver could get a much needed boost from a weaker greenback. The shutdown and debt ceiling showdown however, will likely take center stage until a solution is found.
Silver prices are in a down trend on the daily time frame. After seeing a downside range breakout yesterday, the metals are bouncing today on some short covering and some bargain hunting. Weaker data and a weaker dollar are helping silver’s case today. Silver in fact found support at the previous breakout level around $20.58 which the market tested yesterday.
Often times, when a market stages an upside breakout, it will go back and re-test that breakout level. Should this level hold in silver, it could potentially prove to be a wonderful buying opportunity for the long term investor. In addition, with the current scenario potentially escalating,we feel one could do worse than owning some physical silver at current levels.
This market update is provided weekly with analysis. You can always check spot price of silver by watching our on-site charts.