Silver and gold prices are both under some pressure here this morning as traders and investors await this afternoon’s FOMC decision on monetary policy. This will be a very busy day for the precious metals and investors, as a large amount of data is being released in addition to the FOMC announcement this afternoon.
This morning, markets have already seen the release of the latest ADP employment report, GDP and Chicago PMI. The ADP employment report came in better than expected at an increase of 200,000 jobs while the March data was revised higher to 209,000 jobs added. This may possibly boost expectations for Friday’s non-farm payrolls data. The non-farm data is expected to show an increase of 215,000 jobs added versus last month’s 192,000 figure. The unemployment rate is expected to dip slightly to 6.6% from 6.7%.
The GDP report was a big disappointment, however. Q1 GDP came in at a measly .1% versus consensus estimates of 1.1% growth. This data pointed to a first quarter that basically ground to a halt. Poor weather was blamed for the slower growth. It seems that the metals got a temporary boost from this data but rolled over again following the Chicago PMI data.
Chicago PMI came in way above expectations at a reading of 63 versus consensus estimates of 56.9. The metals once again got weaker following this data release. While anything is possible, it is now likely that metals go sideways prior to the FOMC announcement.
The Fed is expected to stay the course later today and announce a further tapering of $10 billion in its bond buying program. In addition, the Fed may allude to green shoots and slightly upgrade the economic outlook. Although the economy has continued to show signs of improvement, some signs of weakness have been seen such as the Q1 GDP data today and signs of weakness in the housing market. Should the Fed discuss this or other concerns, it could be considered dovish by markets and potentially boost silver and precious metals.
On the other hand, a strong economic assessment by the Fed may spook metals investors and cause additional selling. Demand for silver and precious metals seems to have waned in recent weeks-and perhaps we are now at the point at which silver investors are comfortable waiting to see if lower prices develop. Silver has thus far continued to maintain its trading range but is looking more poised to attempt a downside breakout. A close below the $19 level would potentially indicate another leg lower in silver in the coming weeks.