The silver market is again under pressure here on Wednesday. It would seem that among other bearish factors, the market is finally giving way to the incredible strength in the U.S. Dollar index. In addition to the stronger greenback, the equities market continues to push higher seemingly with no end in sight and this is also weighing on the precious metals.
It is often times simply amazing how markets can behave even when from a fundamental standpoint things don’t make sense. We are seeing this phenomena currently in several markets.It will be interesting to see how the stock market reacts if/when the fed does actually begin removing the “juice.” For now however, the metals are likely to remain under pressure as investors chase returns and the dollar moves up.
This morning the markets got readings on producer prices and manufacturing. The producer price index came in essentially in line with expectations and basically showed no inflationary pressures currently. This is bearish for precious metals, as the metals are often used to hedge against inflation.It is a tad bit worrisome as well, if the fed has not been able to stoke some inflation with all of the money printing something seems a bit amiss….
The Empire state manufacturing index actually missed expectations and showed a contraction for the first time since January. This just goes to show that all is not well in the economic world that we live in. Despite this number, the equities markets are apparently making new all time highs again today….Simply mind boggling…I think many people would agree that at some point this party is gonna stop. We don’t know when but we think it is extremely unlikely that stocks continue this ascent forever. That being said, we continue to feel that precious metals can play a very valuable role in one’s portfolio.
As we have discussed in previous posts, we feel the bull market in metals is still intact, and although the market may retrace quite a bit, we are only concerned with the long term trend.
From a technical standpoint, silver remains in the hands of the bears. After attempting to stop the bleeding the silver market traded in a range from $22 and change to almost $25. That range now appears to be violated to the downside. It seems that a re-test of the April lows around $21.12 is quite likely at this point. Whether or not that area holds as support is hard to say. We feel given the dollar strength, stock strength, and weakness in oil that the possibility of new lows is likely. For the long term investor however, this will simply present opportunities to add to physical holdings at lower price levels.
This market update is provided weekly with analysis. You can always check spot silver price by watching our on-site charts.