Silver prices are flat in midday trade today while gold is stronger. The stock market is under some significant pressure as crude oil prices decline while the dollar index is trading near the unchanged mark.
Markets are reacting today to some significant geopolitical events. North Korea said today that it has tested a hydrogen bomb successfully. If this is in fact the case, it would signal a significant advancement for the nation that will likely represent a large challenge from global leaders.
While some remain skeptical, the notion of the North Korean regime having such a weapon is worrisome. Until more is known; concerns over such capability may keep markets on the defensive.
In addition to the North Korean news; investors are also anxious about more downbeat economic data coming out of China. The Chinese currency has fallen to a five year low and is seeing record lows versus some currencies. Volatility seen early this week in Chinese stocks has seemingly set the stage for volatility in other global equity markets.
As if that is not enough for investors to contend with, tensions in the Middle East remain elevated following the execution of a group of individuals (including an Iranian cleric) over terrorism charges in Saudi Arabia.
U.S. stocks opened today’s session sharply lower, and while the market appears to have stabilized, the market has not seen much of a rally from today’s lower open.
Sliding crude oil is also weighing on sentiment again today and is likely fueling further concerns over the threat of deflation taking hold.
In other news, the U.S. labor market appears to be showing further signs of momentum. The ADP employment report today showed an increase of 257,000 private sector jobs, well above expectations. While this could potentially bode well for Friday’s non-farm payrolls data, some significant divergences between the two data points have been seen before.
While gold may be headed for an upside breakout from its recent range; silver seems to be lagging behind. The silver market has traded in a fairly narrow range over the last
several weeks and seems to be lacking enough bullish momentum for a significant rally. While gld may possibly benefit from safe haven demand; silver could potentially remain weak on worries over deflation and lackluster global economic activity. In addition, precious metals investors may be waiting for more guidance from the Fed about the pace of additional rate hikes.