Silver prices are slightly higher this morning in relatively quiet trade thus far. The silver bulls are attempting to hold the $17 per ounce level following yesterday’s sell off. Stocks are slightly higher, as well, while crude oil and the dollar index are also in the green.
The sell off seen in gold and silver yesterday was likely largely driven by price action in the dollar index. The dollar index has been trending lower since March, and it appeared that perhaps the rally in the greenback had run its course. The rally seen yesterday, however, may cause many to think twice about that. The dollar saw significant upside yesterday, and if the bulls are able to follow through, the dollar could potentially work its way higher again, perhaps even challenging the March highs.
Of course, the direction the dollar takes may depend on several factors, with the fed being the primary driver of price action in the currency. Also potentially driving price action in the greenback is the ongoing negotiations between Greece and its creditors.
A failure to reach an agreement may send the country into default, as Greece is set to run out of cash almost any day now. Should the country default, it may send investors into risk aversion mode, and gold, silver and the dollar could all potentially benefit.
The release of the FOMC meeting minutes today will be closely scrutinized. There remains ongoing debate about the timing of a potential rate hike by the fed, with some investors now feeling that no hikes are likely to be seen until next year. No changes are expected today from the central bank’s commentary, and markets may be disappointed if no further clues regarding rates materialize.
Given the weakness seen in some of the data over recent months, it seems as if the fed will take its time raising rates, not wanting to risk damage to the fragile economy.
For the silver bulls, this could possibly mean that the white metal will continue in its range bound ways for the foreseeable future. The market seems to be comfortable in the $15.50-$18.50 per ounce range, and some type of catalyst may be needed for a breakout.
A Greek default, or changes in the fed’s plans could potentially be such a catalyst. In addition, silver will also likely watch the dollar closely. Should the dollar resume its uptrend, silver upside may become more limited. On the other hand, if the dollar rolls over and starts working lower again, it could possibly invigorate the silver bulls and send prices higher.