Market Overview: Silver is flat to slightly lower in early trade today as the market flirts with the $16 per ounce level. Overall, there appears to be a degree of risk aversion in the marketplace today, yet precious metals are not seeing any flight to safety bid thus far. Investors may be taking a wait and see approach in early going as there is considerable economic data set for release during today’s trading session.
Key Data Points: There is a heavy slate of economic data set for release today including motor vehicle sales, MBA Mortgage Applications, PMI Manufacturing Index,ISM Manufacturing Index, Construction Spending and the Fed Beige Book.
Mortgage applications declined last week according to this morning’s report, although remain significantly higher from levels seen a year ago.
PMI Manufacturing didn’t knock any socks off this morning coming in with a reading of 50.7, just above the flat line. The production component of the report saw a reading of less than 50, indicating contraction. This is the first time this reading has registered contraction in over six years.
ISM Manufacturing saw a slight bump higher to 51.3. Overall, several key components of this report pointed to ongoing activity and are indicative of strong demand for new orders, as well as exports.
The Fed beige Book will likely be watched very closely by investors this afternoon. At a time when the path and timing of interest rates remains up in the air, markets will look for further clues regarding the Fed’s view on economic activity and the potential for a rate hike later this month.
Outside Markets: Stocks are seeing some moderate selling pressure today following some more downbeat data out of China. Stocks remain near previous all-time highs, however, and a run at those highs could potentially be in the cards.
Crude oil is also softer this morning, and may also be seeing some selling following additional signs of weakness in China.
The dollar index is declining in early trade today, and the bulls may be a bit exhausted following the greenback’s recent run higher. The dollar could see additional volatility in the coming weeks as markets try to gauge the likelihood of a June rate hike.
The Big Picture: Silver has been in a form downtrend since the beginning of May and is trying to make a stand at the $16 per ounce level. While from a technical standpoint this area could potentially see strong buying interest, it seems for now that silver may be bogged down by the notion of a June rate hike as well as ongoing appetite for risk. In addition, recent dollar strength has likely taken a toll on silver, and the white metal could be susceptible to further selling in the face of higher stocks, a stronger dollar and rising rates.