December 17th Mid-Week Market Update |
Gold: $1,984.31 0.67
Silver: $24.42 -0.09
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December 17th Mid-Week Market Update
Article By: Matt Zeman on January 01st, 2015

Silver prices are moving slightly higher this morning ahead of this afternoon’s FOMC meeting announcement and subsequent press conference. Stocks are rebounding a bit to start the trading day while oil prices are once again in negative territory. The dollar index is moving slightly higher to begin the session.

Stocks have continued to exhibit a good degree of volatility lately going into the end of the year. While this does not come as a huge surprise given year end position squaring and perhaps lower volumes, the Santa Clause rally has not materialized in the way many thought it might. Stocks may be the key in the near term to potentially higher silver and gold prices, and further weakness could fuel buying in perceived safe-haven assets.

The Fed is not expected to take action today, however, investors will be paying close attention to any guidance given by the Fed on upcoming interest rate hikes. In addition, given the stronger dollar and sliding oil prices, investors will also be very interested in the central bank’s assessment on economic activity. The notion of higher rates may be one factor driving volatility in stocks but is likely already factored into silver prices.

Silver had been trending higher in recent weeks, and has shown some significant signs of having found a bottom. These signs have included a technical downside target being reached along with a large increase in volume around the lows. That being said, the silver market has not had a great week thus far. Silver prices have dropped nearly $1.50 per ounce thus far and are threatening further downside. This may be attributed to thinner trading conditions, a stronger dollar and anxiety ahead of the Fed announcement.

World markets remain quite concerned over falling crude oil prices and the slide in the Russian ruble. The Russian central bank took action this week by implementing a significant interest rate hike from 10.5 to 17 percent, however, analysts fear that the rate hike may not be enough to stop the slide in the currency and that a currency contagion risk exists. The slide in oil is deflationary in nature, and a $40 per barrel price on crude is now within striking distance. Should prices continue to fall, equities may come under additional selling pressure. This could potentially boost demand for silver and precious metals.

It is unlikely that any new significant price action is seen in silver before the new year, however, anything is possible. That being said, a move back below the $15.50 level could spark further long liquidation in the metal. Last week’s highs around the $17.24 area remain near term resistance.