Silver is moving slightly lower in early trade today as stocks rally and the dollar index moves higher. Silver is once again trying to find its footing after seeing a significant drop in price to begin the trading week.
The silver bulls remain on the defensive and a retest of the recent lows could potentially be in store. The silver bulls have not had much to work with in recent action, and the path of least resistance remains lower.
China continues to be a source of concern for global markets. Recent data out of the world’s second largest economy showed further signs of weakness. This weakness has kept equity investors on edge and further stock market volatility could potentially be seen.
Silver and the precious metals complex have not seen any positive reaction to ongoing market volatility. In fact, the bulls are likely scratching their heads at this point, as the metals have not seen any significant flight to quality buying in the face of lower stocks and equity volatility.
Silver and other precious metals may simply be waiting to see if the Fed does, in fact, initiate lift-off this month or in December. While the notion of higher interest rates is considered to be bearish for the precious metals, the pace of any possible rate hikes is likely to be very slow and gradual. Once the Fed does act, it may remove a degree of uncertainty from the marketplace and investors could potentially look to get back into silver and other metals at or around current levels.
Physical demand for silver has remained strong and consistent, but, thus far, the paper market continues to weigh on prices. With ongoing production cuts in silver and with demand for bullion still strong, one has to wonder just how much lower silver could potentially go. Perhaps the market needs to see one final leg lower in price before a long-term bottom is found.
As a decision by the Fed gets closer, the market may be gearing up to tip its hand. A hike by the Fed could potentially send silver and gold to fresh, new lows. On the other hand, such a move may have already been fully discounted and the markets could possibly rally once it takes place.
A significant new leg lower in silver could potentially be bought aggressively, and that could possibly be a turning point for the white metal.