Silver is moving slightly lower this morning following yesterday’s strong gains. Stock index futures, crude oil and the dollar index are all weaker in early trade today.
Silver, like gold, appears to be in the midst of an upside breakout from the trading range it has been in since November. A number of geopolitical factors, economic uncertainty and weaker equities are likely the primary drivers of such a move.
Trading in silver and gold may remain somewhat subdued today ahead of tomorrow’s FOMC meeting announcement. While no changes in monetary policy are expected at this week’s meeting, investors will be paying close attention to the Fed’s statement for any clues as to the timing and pace of further rate hikes. In fact, some believe the Fed will come out with a much more dovish tone at tomorrow’s meeting, potentially setting the stage for a further rally in the precious metals.
On the other hand, if the Fed does not appear to lean toward the dovish side of the ledger, it could spur some selling and profit taking in silver and gold. Such a move could, however, represent a possible buying opportunity.
The Fed could potentially make some changes to its language given the changes in economic conditions over the last several weeks. Investors will closely scrutinize any changes in this language and markets could potentially see some volatility in the aftermath of the statement.
In addition to the FOMC, investors are also watching the crude oil market closely. While crude is back above the $30 per barrel mark currently, the market is vulnerable to further selling. Some analysts are calling for a move down to $20 per barrel in the coming months, while others believe that oil may get as low as $10 per barrel before the selling is over.
Any additional weakness in oil will likely weigh on global equity markets and further damage investor sentiment. Another round of declines in equities and risk assets could potentially boost silver and gold as investors seek out perceived safe havens.
The silver bulls appear to be gaining the near-term technical advantage and further gains in the white metal may be seen in the coming weeks and months. While the notion of further rate hikes may weigh on precious metals, it would seem that the number of potential economic wildcards currently in play could keep a floor under precious metals as uncertainty remains.