Silver as well as gold are trading near the unchanged mark in early trade on Wednesday. The precious metals saw some significant selling during yesterday’s session as the notion of higher interest rates takes hold and concerns over a potential Greek exit mount.
One of the biggest barriers currently to higher silver and gold is the strengthening U.S. Dollar. The greenback has seen a significant rally over the last several sessions and may very well challenge its recent highs. The higher dollar has been an albatross around the neck of silver and gold, and should the dollar start making new, fresh highs it could keep the precious metals bulls at bay.
While the notion of rising rates is likely adding a bid to the greenback, the currency is also likely seeing some safe haven buying as the deadline for a Greek debt deal approaches.
Greek leaders will be meeting with creditors again this week to attempt to come to some sort of deal, however, as the deadline quickly approaches hopes for a deal may be fading.
Although equities sold off yesterday, stocks remain on the strong side of the ledger, and are in fact recouping some of yesterday’s losses as this post is written.
With the first rate hike looming, the precious metals are apparently lacking a significant bullish catalyst to take prices higher. That could change in a hurry, however, if a Greek default comes to pass.
Silver and other precious metals also must contend with low inflation, and lower oil prices may dampen inflation expectations further. On the other side of the coin, however, the lack of inflationary pressures may keep the Fed holding rates lower for longer, which could potentially lend support to the precious metals complex.
From a technical standpoint, silver remains comfortable in its recent trading range. The $15.00 to $18.00 range may continue to contain prices for the foreseeable future. A Greek default and any potential ensuing panic, however, could drive silver and precious metals higher rapidly as risk aversion sets in. The precious metals will, however, likely have to compete with a stronger dollar.