The precious metals complex is trading higher today as the gold and silver markets are finally seeing some catalysts for upside. The political unrest in Egypt is continuing and is driving a safe haven bid in the precious metals complex. In addition, to driving gold and silver higher, this Egyptian situation is also propelling crude oil prices higher. As of this post, oil prices are well off of the highs of the day however, the market continues to maintain trade above $100 per barrel as concerns over how the situation in Egypt will play out ignite some safe haven buying in crude oil as well, and also likely squeeze shorts in the oil market.
Often times, higher energy prices can lend support to the precious metals as inflationary concerns rise along with prices. Interestingly, the unrest in Egypt does not seem to be fazing the stock market which has reversed from early losses and is now posting some solid gains on the session. In addition, the U.S. dollar index is trading moderately lower today while interest rates are on the rise again. The markets almost seem to be sending some mixed messages as to the extent of worry surrounding Egypt currently.
In addition to Egypt, new turmoil involving the government of Portugal is likely keeping a bid in silver prices as well. It is amazing that after all of this time, Europe still seems to get quiet for while then BAM- some new headline comes out of the EU that reignites all of the sovereign debt fears. Well, as we have said before, this problem took years to develop and its gonna take years to overcome.
Finally, the markets are gearing up for Friday’s non-farm payrolls data for June. Today’s ADP employment report as well as the latest reading on weekly jobless claims both came in better than expected. The ISM non-manufacturing number however, was below consensus estimates. It would seem that any misses in the data could be potentially bullish for silver. Obviously, the non-farm payrolls data will be the big enchilada of the week, and this report will likely reignite the debate over the Fed’s plans to taper their bond buying program.
On a technical note, silver prices are challenging their 9 day EMA today. Silver needs to clear this and the week’s prior high in the $20.07 area to gain some additional upward momentum. There are still a lot of market participants who are short the silver market, and we feel it is quite likely we continue to see those shorts unwound. This will likely also help lend support to prices. In the meantime, we’ll see what happens Friday with the jobs report.
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