Silver is trading around the unchanged mark in mid-day trade as the precious metals complex awaits further inputs. This morning saw the release of additional economic data pointing to a strengthening economy.
This morning, markets got the latest data on ADP employment as well as the latest reading on the ISM services index. The ADP report was considered by some analysts to be on the soft side of the ledger. The services index, however, showed a great deal of strength as the index surged to a reading of over 60 percent from a reading of 56 percent in June.
Today’s data may send a conflicting message. Investors continue to closely monitor the Fed and its plans regarding interest rates. While the ADP jobs data was soft and could potentially bolster the notion that the central bank will hold off on hiking rates, the services index tells a different story. Strength in the index may increase the odds of a September rate hike by the Fed.
This Friday’s jobs data will be critical and could potentially make or break the Fed’s decision on a September rate hike. While expectations are for over 200,000 jobs being created, a miss in the number could potentially set the stage for a rally in silver and precious metals.
A miss in the non-farm payrolls data could also give the Fed reason to pause. Should this prove to be the case, the dollar could potentially weaken and silver and gold could see a large short covering rally.
Volatility in precious metals may increase in the coming weeks as summer winds down and investors take some time off. Friday’s jobs data will likely set the tone for silver over the next several weeks.
For now, silver remains on the defensive despite continuing to see strong physical demand. The precious metals complex is surrounded by a great deal of bearish sentiment currently, and while further downside is a possibility, the market also remains vulnerable to a significant short covering rally.
While silver is pointing lower, the white metal may begin to stabilize as producers cut production. The market may, in fact, be closer to this level of equilibrium than many assume. While downside targets of $12 per ounce or even $10 per ounce are possible, physical demand along with decreasing supply may potentially enable the market to find more solid footing in the near future.