Silver prices are lower this morning as a stronger dollar and stronger equities take their toll on precious metals. Like it or not, the economy is continuing to show signs of strength even in light of last Friday’s disappointing non-farm payrolls data. Yesterday’s retail sales data along with today’s jump in the Empire State Manufacturing index has caused investors to cheer on the economy and stocks thus taking away from the appeal of precious metals. At this point, equities have essentially erased the steep losses from Monday and are looking poised to make fresh, new highs.
Following last Friday’s jobs report, there was some talk of whether or not the Fed may hold off on tapering further. It would seem that in the few days since that report, all talk of such potential Fed inaction has been crushed. Of course, things can change-but at this point there does not appear to be any reason that the Fed would delay additional tapering. Precious metals investors apparently realize this as well as the metals have thus far stalled at some key resistance areas. As we have discussed in previous posts, this week should be a very telling one for silver and precious metals. Unfortunately for the bulls, the metals are beginning to look weak once again and we could be witnessing the beginning of another failed rally attempt.
Silver has a lot working against it right now. Such issues include lower oil prices, no signs of inflation, strong stocks and a strong dollar. For silver to stage a significant rally higher, something has to give. What that might be no one knows. Thus far, stocks appear to be very resilient in the face of additional stimulus withdrawal, but this could change as the Fed continues to ease back on the throttle. If or when stocks undergo a stronger correction, however, is anyone’s guess. It is seeming more and more likely that silver and gold trade relatively range-bound for the foreseeable future. This is not to say that there will not be rally attempts along the way. The fact is, however, that silver will likely remain a sell the rallies type of market until proven otherwise.
After staging a false breakout above the $20.50 level, silver has fallen back near the $20 level. The market appears very comfortable in the $19-$20.50 range and could oscillate in this range for some time. If silver is able to convincingly take out yesterday’s highs at $20.67, then short covering could ensue along with fresh buying that could potentially propel silver prices to the $21.50 area.