Silver prices are slightly lower today in what looks to be light, pre-holiday trade. Investors likely have turkey on their minds today and price action may be uneventful or even choppy as trading volumes are light.
Silver is currently re-testing the $14 per ounce level, a level last seen in late August. Silver and gold currently do not have much working in their favor as investors await the Fed’s initial rate hike expected next month. While the uncertainty surrounding the Fed’s lift-off may have been removed to a degree, the notion of higher rates is still taking a toll on precious metals.
Silver has been moving lower this week as the trend remains lower. The pace of declines, however, appears to have been slowing. While silver may potentially find some degree of support at current levels, the possibility of another sharp leg lower remains.
The silver bulls are currently contending with a stronger dollar index as well as higher equities. The stock market thus far appears comfortable with a rate hike, and a hike may even be seen as a market positive as the economy continues to show signs of improvement. That being said, however, stock investors could potentially change their tune dramatically once the initial hike does take place.
The notion of higher rates continues to bolster the dollar. The greenback is currently trading above the 100 level and could potentially be setting up for a significant leg higher. How much room the dollar has to run could, however, be determined by the Fed and how aggressive it may be regarding rates. While the general consensus appears to be that the pace of any rate hikes is likely to be very slow and incremental, the Fed could act faster than expected. This could send the dollar sharply higher and could potentially weigh on silver and precious metals.
Stocks may potentially play a large role in any further downside or any rallies in precious metals. Equities have been strong, even in spite of some escalating geopolitical issues and even with a rate hike apparently imminent. This stock strength could possibly keep silver under some pressure as investors seek out higher return potential. On the other hand, should stocks begin to falter once the Fed does act, weakness in equities could potentially ignite a rally in silver and precious metals as investors seek out alternative asset classes to put capital to work in. Price action in silver may remain choppy ahead of next month’s Fed meeting, and for now the bears have the technical advantage.