Silver prices were lower during Wednesday trade. Minutes from the March FOMC meeting were released early on Wednesday due to some technical glitch. The initial reaction to the minutes was bearish although silver did spend much of the day moving sideways and the metal did not seem to suffer the same degree of selling that was seen in the gold market today. Perhaps there is some gold/silver ratio trade at work here?
Most notably regarding the FOMC minutes is the fact that it appears that more central bankers would now consider removal of stimulus measures. One must keep in mind that this meeting was held prior to last week’s non-farm payrolls report, however, it does appear that the Fed is signaling the very beginning of an exit strategy or at the very least laying the groundwork.
This sent the U.S. Dollar Index higher while pressuring the precious metals. Recent dollar strength appears to be playing a major role in keeping gold and silver on the defensive. It would seem that the metals will have a difficult time staging any meaningful rally in the face of such dollar strength.
Also weighing on metals is the fact that the stock market just continues to climb higher into record territory. All the money sitting on the sidelines we have heard so much about over the last few years appears to be finding its way into the market.
Silver has fallen victim to this stock strength as investors pull funds from perceived safe-haven assets such as precious metals and put those funds to work in stocks and risk assets. Right now, there is just no real sign of this letting up either. This could keep silver under pressure for the foreseeable future.
In addition, more large banks are calling for lower precious metals prices and this is also likely to keep buyers on the defensive. The fact is that silver prices are on the brink of trending lower on the longer term time frames. Should silver turn down on the monthly charts,there will likely be considerable more downside to go.
While speculators may look at this as an opportunity to get short the market, long term investors may view at is an opportunity to add to physical holdings at lower price points. Regardless of all the current bearish talk surrounding metals, many bullish factors are still intact.
Worldwide debt issues, money printing, and geopolitical risks remain. Inflation may accelerate at some point in the future. The point is, there is just as much reason now to buy physical bullion as ever.