Silver is trading slightly higher today as stocks and crude oil fall and the dollar index moves higher.
The precious metals complex is awaiting further direction from the Fed and is awaiting a speech by Fed Chairwoman Janet Yellen tomorrow afternoon. While it appears that the Fed is still looking to initiate lift-off before year’s end, there are some doubts given the ongoing slowdown being seen in China, as well as some weaker data in the U.S.
The latest manufacturing report to come out of China was a let-down. PMI fell to a multiyear low and suggests contraction within the sector. Weaker readings on key Chinese data points may keep investors on their toes and may keep markets on edge.
Unfortunately for the silver bulls, the Chinese slowdown may keep a lid on any gains in the white metal. Weaker Chinese demand for raw commodities may potentially keep crude oil and other commodities under some pressure and may potentially act as a drag on silver, as well.
On the other hand, however, weaker Chinese stocks could potentially also work in silver’s favor. If Chinese investors begin to pull more investment capital out of stocks, they may possibly look for alternative asset classes in which to put capital to work. Silver could stand to benefit if money begins finding its way into the market.
The dollar index is being closed watched by investors currently. After trading down to the $93 level just weeks ago, the greenback has bounced back substantially and may potentially be poised for further upside. This dollar strength may potentially weigh on the silver market and, combined with a probable rate hike, may make life difficult for the silver bulls.
Stocks may potentially hold the key to silver’s fortunes for the time being. The market appears to be rolling over at this point and further downside is a possibility. If stocks do in fact begin moving decidedly lower, risk aversion may set in and fuel a rally in silver and precious metals.
While silver has been bought on recent dips, the bulls have not been able to string together a sustainable rally in price. The longer that silver is unable to put some distance between itself and the recent lows, the more potentially likely a re-test of those lows becomes. The market may simply be in a holding pattern until the Fed does in fact take action, or changes its guidance. Perhaps once more clarity is seen the market will begin a more sustainable directional move.