Silver prices are putting in a good showing thus far today with silver prices up over $.50 as of this post and above the $23 level. There is likely some ongoing short covering in silver prices as well as fresh buying. In addition, there is some position squaring likely taking place ahead of this afternoon’s FOMC meeting announcement.
It is a fairly busy week for silver with numerous data points to digest. The market has already gotten the latest readings on pending home sales, consumer confidence, retail sales and more. In fact, this morning the markets got the latest ADP jobs data and the numbers were not very impressive.
The ADP report showed a rise of 130,000 jobs which was well below consensus estimates. As has been the case recently, weaker data has been bullish for precious metals as it adds credibility to the notion that QE is here for a while longer. The dollar has remained under pressure due to this in recent weeks, and will likely remain under pressure as the data stream disappoints.
Speaking of the dollar, the greenback will have a lot more to chew on this week in the form of weekly jobless claims, Chicago PMI, ISM manufacturing and commentary from a few Fed officials. This afternoon’s FOMC announcement will likely be the biggest data point of the week however.
Investors will be listening closely for any clues as to the timing and extent of any potential tapering by the Fed which is now widely expected to not take place until sometime in the mid to late first quarter of next year. Investors will also eagerly listen for the Fed’s assessment of current economic conditions. The dollar index will likely react to the Fed statement, and should be watched closely. Should this index break the 79 level it could fall quite a bit further and thus potentially fuel a strong rally in silver and precious metals.
Silver currently remains in a bullish posture with further upside potential. The mid-September high around $23.42 remains the next likely upside target. Above that level, the 200 day EMA and some past price congestion in the $24 area seem like a likely secondary target if the rally continues.
Silver prices are beginning to turn up on the weekly time frame as well, and should prices start trending higher on this longer-term time frame additional buyers could potentially seek to enter the market. Solid support in silver is seen at $22 and as long as the market stays above this level it may make sense to lean to the long side. FOMC commentary and the potential for ongoing weakness in economic data and a corresponding drop in the dollar will likely be the biggest factors for any ongoing rally in silver prices and precious metals in general.