Silver prices are slightly lower in early trade today as gold also softens. The selling being seen today in silver and gold is likely largely attributed to profit taking following recent strong gains.
Stocks are moving sharply higher this morning while crude oil is flat and the dollar moves higher. Overall, risk appetite appears to be stronger today following another round of selling in equities. Oil prices are sinking again and trading below $28 per barrel. After seeing a bit of a bounce in recent weeks, crude oil appears to have rolled over and could potentially be headed for fresh new lows. The $20 per barrel target so many have called for is within striking distance and some believe oil could fall as low as $10 per barrel before bottoming.
Of particular investor interest today is the commentary from Fed Chairwoman Janet Yellen before the House Financial Services Committee. Ms. Yellen is certainly not doing or saying anything to increase the odds of a March rate hike. In fact, she has reiterated that monetary policy is not on a “preset course” and seems to be taking a very cautious tone in her remarks. Ms. Yellen also stated that financial conditions “have become less supportive to growth.” Clearly Ms. Yellen is referring to ongoing deflationary pressures and a very rough start to the year for stock indices. Ms. Yellen also cited worries over China in her remarks and discussed how downside risks could potentially cause a further tightening of financial conditions.
While the expectation by many analysts headed into 2016 was four interest rate hikes by the central bank this year, those expectations seem to be changing. Some analysts now believe that number will be cut in half to two interest rate increases this year. The Fed appears to be leaving its options open, however, and does not appear to be in “automatic tightening mode.”
While silver could potentially see some back and fill trade over the next several sessions, the bulls have established short-term technical control and the path of least resistance appears to be higher. Trading at the highest level since last November, silver prices could potentially make a run at the $16 per ounce level in the near future. A break above this level could possible set the stage for a larger-scale rally that could potentially see silver make a run back towards $20 per ounce.