Silver prices are slightly lower this morning and not doing much of anything as stocks rise, crude oil prices rise, the dollar trades flat and the FOMC minutes are on tap for later this afternoon. Due to this being a President’s Holiday shortened week, a large amount of data will be packed into the next few days. Investors have gotten the latest readings on Empire State Manufacturing, housing starts, producer prices and the housing market index. Tomorrow markets will get to digest the latest readings on weekly jobless claims, the consumer price index, PMI Manufacturing, the Philly Fed survey and leading indicators. On Friday, markets will see the latest data on existing home sales.
The FOMC minutes set for release later this afternoon will likely be the biggest report of this week. Investors are anxious to see what the Fed may be thinking about the economy and the recent rough patch that has been seen in the data. Clearly investors continue to wonder what the Fed’s plans are in terms of additional tapering, but perhaps even more important than that today will be the Fed’s assessment of the economy. Recent economic weakness along with strains in emerging markets has made investors a bit more anxious. This has triggered some profit taking as well as reallocation of funds. This has worked to silver’s benefit thus far. The big question now is will this trend continue or is this simply a rough patch in the data?
Also potentially driving metals this week is the escalating violence in Ukraine. Should this situation deteriorate, it could potentially feed flight to safety buying in gold and silver.
After trading sideways for several weeks, silver prices appear to have completed a bullish rectangle pattern on the daily chart. In fact, the silver market has staged a very clear breakout in prices, and could potentially move much higher in the short term. This new thrust higher in silver could potentially target the $26 area on the chart. Corresponding strength in gold and crude oil prices are also lending support to silver prices. The U.S. Dollar index is approaching support at the 80 level, and should the greenback take out this level to the downside, it could really give silver a further boost. Precious metals investors will likely be watching this level closely. Demand for physical silver has remained consistent, and this upside breakout in prices currently could attract more fresh buyers into the market and squeeze out remaining shorts.