Silver and gold are both trading slightly lower this morning ahead of this afternoon’s FOMC meeting statement. In addition, stocks and oil are also moving lower while the dollar index is moving up.
Today’s FOMC meeting announcement and subsequent press conference could give investors more clarity as to the timing of the first rate hike. In addition to announcing its decision on interest rates, the central bank will also release its quarterly forecasts.
As has been the case for some time, investors may zero in on the word “patient” when the Fed discusses interest rates. The absence of this adjective would act as a clear signal to markets that rates are going to rise in the near future, perhaps in June or September.
Should the central bank not make any changes to past language, it may signal to markets that the Fed is still concerned about various issues such as lack of inflation and the job market, and the first rate hike may not come quite as soon as expected.
In addition to the Fed, precious metals investors are also likely watching crude oil prices. Oil has begun to slide again, and this could potentially be the beginning of another leg lower for the oil market. Some analysts still believe the price of crude oil may bottom out somewhere in the $25-$30 per barrel range. Further weakness in oil prices could potentially weigh on silver and precious metals as deflation concerns increase.
The dollar index is slightly off its recent 12 year highs, as some profit taking is being seen and some short covering takes place in the euro. The dollar does appear poised for further upside, however, and should its ascent continue at the recent pace, it may weigh further on not only precious metals but equities as well. It is worth noting, however, that given the amount of shorts in the euro, should a large scale short covering rally take place the dollar could potentially see a sizable pullback. The shared currency does, however, appear headed for parity with the U.S. dollar.
From a technical standpoint, the silver bears remain in firm control of the market. Silver prices are lingering around the winter lows, and a break below could potentially ignite another wave of selling that could possibly see silver heading towards the $10 mark in the coming months.
It is possible, however, that silver may rally once the Fed does hike rates. The notion of higher rates appears to be a foregone conclusion, but the precious metals bulls may take solace in the fact that rates are not likely to rise by much for some time.