For all the hype surrounding current events in Cyprus and the FOMC announcement today, silver prices sure did not feel like doing much. As a matter of fact, silver and gold spent the majority of today’s session moving sideways.
Silver futures for May delivery stayed in roughly a nickel range ($28.75-28.80) for much of the day. Futures did take a dip immediately following the Fed announcement but quickly regained their composure. This also occurred in the lighter volume globex session following the pit session close.
It is amazing how quickly once again the markets have been able to look the other way in the face of bad news. Cyprus seemed to be the potential catalyst for a market correction in stocks and risk assets just 2 days ago. It seems it is barely being talked about now today.
It would appear that barring any new damaging headlines coming out of Cyprus, the rally looks poised to continue. Simply looking at heavy volumes when the SP’s were trading on the lows yesterday shows that there was buying being done by larger market players. The question for silver investors is how will this effect silver prices? Time will tell.
The other major factor affecting prices today was the FOMC announcement. The Fed left its “accommodative” stance unchanged-at least for now. This move, or lack thereof, came as no surprise to the markets. What was important was some of the underlying messages of Bernanke’s comments following the rate decision.
Bernanke indicated that the Fed is monitoring this course closely, and understands that there are indeed risks involved in ongoing loose monetary policy. The Fed also acknowledged that the economy continues to make progress albeit at a “moderate” pace. They also indicated that risks to growth remain.
It seems as if Bernanke is telling markets that the stimulus measures are in fact paying off, but that they cannot go on forever. This could be bearish for the metals as once the Fed does begin the tightening process, the dollar is likely to stay strong thus pressuring the precious metals and other commodities.
Again, no exact timeline has been given for when the punchbowl may begin to be removed by the fed. Should the data stream continue to show improvement however, it could come faster than many think.
Silver futures continue to trade in a range from $28.50 to $29.47 and seem to have found some near-term equilibrium around the $29.00 level. Silver bears still maintain technical control. A break of $28.50 on the downside should send prices lower for a re-test of the $28.00 level.
For the bulls to get anything going to the upside, silver must take out near overhead resistance around $29.10 which also happens to coincide with the 20 day exponential moving average. With a close above this moving average, it is likely that additional buying comes into the market and a test of resistance at $30.00 is seen shortly thereafter.
Chart Source: QST