Silver prices are moving sharply higher today as stocks tumble, crude oil rises and the dollar index moves sharply lower. The precious metals complex today appears to be getting a strong lift from overall risk aversion and dollar weakness.
This morning, investors got the latest release of the ADP employment report. The report showed a gain of 205,000 private sector jobs and did not appear to elicit much of a reaction from investors. Markets will, however, be watching closely on Friday when the latest non-farm payrolls data is released for January. Consensus estimates are looking for 188,000 jobs added in January with the unemployment rate remaining at 5 percent or ticking slightly lower to a 4.9 percent reading. While the number of jobs created is far below the large December reading, the unemployment rate is expected to hold steady while wage measures may show an increase after no change in December.
Investors are also contemplating the Fed’s next moves. While many analysts have called for four interest rate hikes this year, those expectations may be changing. Recent volatility in global equity markets, ongoing worries over China’s economy and the threat of global deflation could potentially make the central bank think twice about the pace of further hikes. Some analysts now believe the Fed will hike twice this year.
In other news, today’s release of the latest ISM Non-Manufacturing PMI showed a decline to 53.5 percent. This is significantly lower than December’s 55.8 percent reading. Also of particular note is the decline in price pressures seen in the service sector. According to the report, the prices index declined to 46.4 percent down from a 51 percent reading in December. This drop represents the third time in the last five months that prices have declined.
Silver and gold could potentially see further buying interest under present conditions. Investors appear to be getting more leery of equity markets, and many commodity prices continue to languish at levels not seen in some time. Markets are seemingly watching every move in crude oil, with stock investors unwilling to do much buying on days crude is falling. That being said, oil is seeing a nice rally today and stocks are still lower. There appears to be a lack of confidence currently and equity markets could have further tough times ahead. If further volatility expansion is seen, more investors may seek out the perceived safety of silver and gold driving prices sharply higher in the process.