Silver prices are trading slightly higher this morning as investors await the much anticipated FOMC announcement later this afternoon. Markets could remain stagnant before the announcement with the potential for some erratic trade as final position squaring ahead of the Fed takes place. In addition, it is anyone’s guess at this point as to whether or not the Fed will taper today and how markets might react to action or lack of action by the Fed today.
The precious metals markets have been looking for some direction as to the timing and extent of any tapering by the Fed-and perhaps they will get some answers today. Markets do not appear to be fazed much by the notion of tapering, and in fact the whole idea of the Fed tapering appears to be old news at this point. The question seems to be-will the Fed be willing to rock the boat ahead of the holidays and approaching the end of trading year? There is no clear cut answer to this. Some estimates put the chances of a taper today at 60% while others feel that the Fed will most certainly hold off. Whichever case proves to be correct, it seems as if markets know its coming sooner or later and have already discounted it. With regards to silver and precious metals, so much emphasis has been placed on the notion of tapering being bearish for metals that the actual act of tapering could prove to be quite bullish. It seems as if too many people have gotten on the short side of the ship-and therefore the ship could capsize. This could fuel a large short covering rally as well as attracting fresh buyers into the market.
Silver has been putting up a good fight lately. The bears remain in firm control however, the bulls have been able to hold the bears at bay for several sessions now. In fact, since the swing low in early December the silver market has been making higher lows and could be getting poised for an upside breakout. Silver is trading between its 9 and 20 day EMA’s today, and a breakout above the 20 day EMA could fuel a rally that could possibly target the 50 day EMA at the $20.65 area. The market is also in the process of trying to turn up on the weekly charts, and should it be able to do this it is quite possible that more shorts cover and more fresh longs or physical buyers enter the market. We’ll see what happens with the FOMC today, but thus far buyers have been able to absorb the sellers in silver-and therefore the stage could be set for higher prices in the near-term.