The silver market is slightly lower in early trade today as risk aversion is letting up a bit today. While stocks opened higher, much of those gains have evaporated throughout the session. The dollar index is stronger today while crude oil prices are falling.
Following a brief dip to sub-$14.oo per ounce levels, the silver bulls have been holding the $14.50 level for the last few sessions. The lack of upside in silver may come as somewhat of a surprise given the recent state of volatility in global equity markets.
Worries about China’s economy will likely continue to be the center of attention for both stock and commodity investors. While silver may potentially see some benefit from risk aversion, it also may potentially see selling based on concerns over Chinese demand.
Right now, it appears that markets are taking their cues from China and China alone. If Chinese stocks fall, selling is seen in U.S. stocks and vice-versa. While recent volatility seen in equities may not last forever, it is difficult to determine when it may have run its course.
Adding to concerns about China is the notion of a U.S. rate hike. While expectations of a hike have dwindled following recent market activity, the Fed could still possibly hike rates in just a few short weeks. This Friday’s non-farm payrolls data for August could be a deciding factor on whether the Fed takes action or holds off.
If Chinese markets are relatively calm the rest of this week, U.S. markets may see some sideways action as investors await Friday’s jobs report.
If the report does not meet consensus estimates, it could potentially drive selling in the dollar and may potentially offer silver and precious metals a boost. On the other hand, a stronger-than-expected jobs report could possibly lift the dollar index higher and add to selling pressure in silver.
Despite everything going on currently from an economic standpoint, demand for silver remains robust. The U.S. Mint reported one ounce American Eagle silver coin sales of 4.935 million ounces last month. This figure is more than double the 2.088 million ounces sold during the same month last year.
Silver at current levels may potentially continue to see strong physical demand from investors. This physical demand along with production cutbacks could be the key to silver finding a bottom. While silver could have more possible downside to go before finding a bottom, it seems that the market is getting close.