Silver is slightly lower today in early trade as stocks, crude oil and the dollar are all advancing.
Markets appear to have fully digested recent commentary from the Fed regarding interest rates. The central bank elected to hold off on a rate increase at its most recent meeting and recent economic data could potentially suggest that the Fed may potentially be on hold even longer than anticipated. In fact, while the central bank could still raise rates this year, it appears to some that a move by the central bank may not take place until March.
The notion of “lower rates for longer” is likely driving stocks, currently, as the broad market SP 500 index has climbed approximately 130 handles in just a few days. Whether or not the recent rally is sold into, however, remains to be seen.
On the other hand, silver has seen a rapid ascension higher in recent trade, as well. The silver market has risen nearly $1.50 per ounce in just the last few sessions. This rise is likely a mixture of short covering, as well as fresh buying. With the market currently knocking on the door around $16 per ounce, the bulls have some momentum going. A break out above this level could potentially fuel further short covering while enticing new longs to enter the market. The next several sessions may be critical, however, as the bulls will have to keep pushing forward while the market may be met with willing sellers.
The precious metals complex may also be potentially benefiting from increasing tensions between Turkey and Russia. Recent developments, according to some reports, would seem to suggest that Russian involvement in the Syrian civil war is escalating. In addition, it has been reported that Russia has violated Turkish airspace on two separate occasions in recent days, and this is a clear cause for concern.
While these recent developments do not appear to be fazing stock investors, should a further escalation be seen it could potentially stoke risk aversion in equities and possibly drive buying in perceived safe haven assets, such as gold and silver.
While from a technical standpoint silver is looking much better in recent trade, the market may still see some significant hurdles to further upside. The data stream will be very closely watched in the coming weeks as investors form opinions on the likelihood of a rate hike in the near future. Should equities show further volatility and weakness, however, silver may potentially see more buying interest as investors look for alternatives to put capital to work in.