Silver prices lost ground during Wednesday’s action, and may very well be headed back towards recent lows. While bargain hunters may be happy to pick up more silver at what many consider to be “wholesale” prices, the market is becoming more vulnerable to a fresh leg lower in price as investors may choose to wait for even lower prices before stepping in and buying.
This week, Greece was granted another bailout package by its creditors. This deal came over the weekend; a weekend that many felt could potentially see Greece set the stage for an exit from the euro. In the end, however, Greek leadership accepted the terms of the bailout as the lesser of two evils. The country will have to endure further austerity measures, and these measures will likely weigh significantly on an already weak Greek economy.
The future of Greece’s current leadership may also be a topic of hot debate in the near-term. Greek Prime Minister Alexis Tsipras was elected just several months ago, and his anti-austerity Syriza party vowed to put an end to what they described as unacceptable austerity measures imposed by the EU.
While the Greece situation may have calmed for now, this is likely not the end of the ongoing saga, and the most recent bailout package could be nothing more than a band aid if Greece is not able to implement the required measures.
The dollar rose today as remarks by Federal Reserve Chairwoman Janet Yellen were considered to be hawkish. Ms. Yellen reiterated the central bank’s plans for a rate hike still to come this year, even as worries over Greece and China remain. These remarks added to selling pressure in the precious metals complex, and that selling pressure may remain significant unless a bullish catalyst changes market sentiment.
China may potentially drive market action in the near-term in both equities and precious metals. Investors will be closely watching Chinese markets for any further signs of trouble to come. While China has taken steps in recent weeks to support its stock market, some are already wondering if these actions will be enough. While the actions taken are quite significant, the fact that these steps were taken could potentially point to more underlying weakness. Investors may view the recent steps as an artificial way to boost markets and may decide to sell based on this notion.
Additional weakness in China may also drive the commodity sector lower as China is one the world’s largest consumers. Weak Chinese demand for commodities would likely have a very negative effect on silver, and could be one of the primary catalysts for another possible leg lower in prices.