Silver is slightly higher this morning in early trade following steep losses yesterday. The market had rallied about $1.00 per ounce from the $14.50 level to the $15.50 level in recent trade. It now appears, however, that the bears were happy to sell into the rally and prices may potentially be headed back to recent lows.
In key outside markets this morning, the dollar, crude oil and stocks are all moving lower in early action.
Will The Fed Signal Liftoff?
This has become the $64,000 question… Today’s FOMC meeting minutes may provide investors with further clues as to the Fed’s intentions regarding rates. Following the non-farm payrolls data for July released earlier this month, it seemed that a September rate hike was not only possible but also very likely. Some analysts believe that if the non-farm payrolls data for August comes out in similar fashion, then the Fed will almost certainly hike rates by 25 basis points.
The notion of a September rate hike has been called into question, however, for several reasons.
Worries over China and its economy have kept investors on their toes. The Chinese Government has taken numerous measures to stabilize its equity markets and to try to promote economic growth. The most recent devaluation of the yuan caught markets by surprise and is a further indication that the Chinese Government appears willing to act aggressively in order to fight a slowing economy.
U.S. economic data has also seen some bumps, although market volatility has remained relatively benign thus far.
The lack of overall inflation may remain a concern. While prices have been ticking up slightly, they remain below the Fed’s target. Some believe it is difficult to imagine the Fed raising rates without more inflationary pressures.
The Fed has given some mixed signals on rates and the decision on a September rate hike may be made at the last minute. Markets could potentially see some range bound action until that time, especially as summer vacations wind down over the next week or two.
Silver and gold may potentially benefit whether there is a rate hike or not next month. A hike would remove the ongoing uncertainty about such a move, while a signal that the Fed wants to hold off could potentially boost precious metals while weakening the dollar.
Although silver remains in a downtrend, the market may have found, or may be close to finding, a near-term bottom. Physical demand for silver, as well as production cuts may help the metal to stabilize and find firmer footing.