November 6th Mid-Week Market Update |
Gold: $1869.2 -3.51
Silver: $23.02 -0.18
November 6th Mid-Week Market Update
Article By: Matt Zeman on November 06th, 2013

Silver prices are trading modestly higher on Wednesday as a weaker dollar and short covering drive the metal higher. The metal has traded in a very tight range the last two sessions following last week’s losses as investors await further inputs.

Thus far this week, the market has gotten the latest readings on factory orders and ISM non- manufacturing data. The factory orders data appeared soft while the ISM non- manufacturing data beat expectations. Markets will see the latest reading on leading indicators here shortly and are looking forward to Q3 GDP data tomorrow as well as weekly jobless claims.

On Friday, markets will get the non-farm payrolls data for October. This number is expected to be much lower with consensus estimates looking for 120,000 jobs created and an unemployment rate of 7.3%. Given that this number will be so skewed by the partial government shutdown last month, it is unclear whether or not a very poor reading will phase markets much.

Investors will also be watching the European Central Bank meeting tomorrow. Although many feel that the ECB is likely to cut rates at some point in the near future, many doubt that any action will be taken tomorrow. In the meantime, the dollar index has moved back above the 80 level and although down today is continuing to show some signs of strength.

This dollar strength could weigh on silver and the precious metals complex. One has to wonder however, if the recent rally in the greenback is sustainable given some of the poor data seen recently. The Fed however, did sound more hawkish last week and that could keep the dollar supported and keep silver and precious metals on the defensive.

Stocks in the meantime continue to march higher as investors remain hungry for risk and return. Although there are some signs of stocks slowing down a bit, the rally may very well continue until such time as the debt ceiling takes center stage again or some other outside catalyst comes into play. Higher stocks may also potentially act as a roadblock to a meaningful rally in silver for the time being. We do not however, expect this trend to continue forever.

Silver prices are currently still in no man’s land on the daily chart. As of this post, silver prices are attempting to breach the 9,20 and 50 day EMA’s  to the upside. These key moving averages are all currently clustered in the $22.05-$22.07 area. A meaningful close above this level would likely attract more buying and short covering while a meaningful failure here could reinvigorate the bears and lead to more selling. We expect however, to see who is able to take control of silver prices over the next couple sessions. Right now, the bulls and the bears appear to be on fairly equal footing.