When it comes to silver this week, well, there frankly is not much to report. The silver market continues to trade sideways for all practical purposes and until we see a definitive breakout one way or the other it is hard to tell which way prices may be headed from here.
In addition, there is very little data this week for the markets to scrutinize. What we have is a market trading on technicals right now in the absence of data and news. Although the market has been range bound recently, the bears do still have the upper hand and another wave of selling cannot be ruled out. Now, depending on your investment goals, this could potentially provide another opportunity to add to physical holdings at lower price levels.
Looking at the bigger picture, risk assets and stocks continue to work higher. The sp500 seems almost unstoppable here as the market has covered 50 handles of upside in just a few days. How long can this continue is the question many investors are asking themselves… Well the fact is it is hard to fight the Fed.
So long as the Fed keeps the printing presses rolling it will be difficult for equity bears to stage any real sell-offs. This strength in stocks is likely one of the primary roadblocks that the precious metals are facing. On one hand, the money printing is widely considered to be bullish for silver as it is likely that the dollar will eventually see some serious downside.
On the other hand, the money printing is continuing to force investors to take risk in order to achieve some type of return, and the potential for immediate returns in the stock market is attracting investors who could otherwise be diversifying into other sectors such as precious metals.
Now obviously we do not feel this trend will continue forever, but there is no way to tell when it will stop. This goes to show that seeing the forest through the trees is important. It also demonstrates why it is important to have long term objectives. It is important to not forget that the stock market has seen lofty levels before(not this lofty in terms of actual price but lofty nonetheless).
If one examines a monthly sp500 chart going back several years, one will see the market reached an extreme high and then proceeded to sell off viciously. Now we are not saying that will be the case this time around, but the possibility is certainly there. Should that prove to be the case however, it could be another catalyst that could potentially drive precious metals sharply higher from current levels. In the meantime, we think it is important to focus on the long term.