The silver market is moving higher in early trade today as stocks come under pressure, crude oil climbs and the dollar index declines.
In spite of higher oil this morning, stocks are on the weaker side of the ledger. This may likely be due to some profit taking and position squaring ahead of today’s FOMC meeting announcement.
Stocks have risen sharply in recent weeks as crude oil prices have rebounded. Oil is trading at multi-month highs currently, and could potentially see further upside. Even with a failed meeting on production limits, the oil market may have potentially found a bottom and stable/rising oil and a weaker dollar may both support buying in silver and other precious metals.
Perhaps the most key piece of data for the week will be released this afternoon when the FOMC meeting announcement is made. No changes in monetary policy are expected at today’s meeting, however, the Fed’s statement may potentially provide further clues as to the timing and pace of future hikes.
Market expectations now seem to be looking for another interest rate hike in June, with another possible hike coming in December.
The central bank’s actions and commentary could have a significant impact on the dollar index which has been under some selling pressure in recent weeks. The dollar index is approaching a prior low that may potentially act as support. A breakdown below that low, however, could potentially see the beginning of a significant, fresh leg lower in the greenback. This could potentially be a key driver for precious metals and further dollar weakness will likely keep a floor under both silver and gold.
The silver market appears to have found a long-term bottom at this point, and looks poised for further upside. In fact, any dips in silver may be bought and the market could potentially see another run higher of several dollars per ounce in the coming weeks and months.
The stock market may currently be a negative influence on precious metals as it approaches previous highs and risk appetite remains robust. The recent upside in silver and gold may, however, be a sign of underlying strength in the face of stronger equities.
On the flip side, a breakdown in equity markets could also potentially stoke additional buying interest in silver and precious metals if risk aversion sets in. In the meantime, the path of least resistance for silver appears to remain higher.