Is it all about crude oil? Talk of lower crude oil prices is once again dominating headlines. The price of oil is falling once again today and is down nearly $2.00 per barrel. OPEC has reported that it sees declining demand for oil in 2015 and that is causing more selling to enter the market. The oil market is approaching the $60 per barrel mark, and as of right now it is questionable if that level will hold. The ongoing weakness in crude oil prices is taking its toll on stocks which are weaker today as energy companies are getting hit.
Gold and silver prices do not appear to be too interested in oil’s slide today, however, and both are trading close to unchanged on the day. That being said, the precious metals saw a sizable rally yesterday and it appears that additional safe-haven demand is finding its way into silver and gold. The silver bulls are trying to build on some technical momentum here, and further upside appears to be in store. The silver market is currently in an area of previous price congestion, and a break above the $17.68 level could potentially fuel further fresh buying. Of note as well is the pick up in volume that has been seen in silver. This increased volume could potentially be indicative of a bottom in silver.
While silver is looking more bullish at this point, stocks may continue to hold the key to higher prices. Stocks have seen more volatility recently, and have backed off from their highs. The question now becomes whether or not this proves to be a dip that is bought or the beginning of a larger correction. While the Santa Clause rally cannot be ruled out, the notion of lower oil prices and the Fed perhaps acting sooner rather than later appear to be weighing on equities and may continue to do so. The precious metals markets may be biding their time in anticipation of investor reallocation in the first part of the new year.
The dollar index may be running out of steam. The greenback has been experiencing a strong uptrend but recent price action may suggest that the market has been overbought. Should the dollar index show some signs of weakness, this could also fuel demand for silver and precious metals.
Investors are still looking forward to the latest data on weekly jobless claims, consumer sentiment, retail sales and PPI this week. Activity in the equities markets and the dollar index will likely continue to drive price action in the silver market as investors await next week’s FOMC announcement.