Silver prices are not doing much of anything this morning. As of this post, July silver is trading down about $.08 in what appears to be quiet trade. The silver market may simply be taking a breather following the large sell-off seen Monday and then some additional pressure yesterday. Silver prices have dropped a dollar in the last week and are now trying to find some support.
It has been a relatively light week thus far from a data release perspective. Markets have gotten the latest readings on retail sales, Empire State Manufacturing and PPI. Arguably the biggest market mover of the week thus far was Fed Chairwoman Janet Yellen’s testimony yesterday before the Senate Banking Committee. Although Ms. Yellen really did not say anything new of any significance, the precious metals markets did not appear to like what she had to say. While Ms. Yellen did reiterate the need for further support from the Fed, some believe that her downplaying of inflation expectations is what caused more pressure in metals. The Fed will also be releasing its Beige Book on economic activity later this afternoon.
Tomorrow the markets will get the latest readings on the Philly Fed Survey, weekly Jobless Claims and Housing Starts. Friday will cap off the week data-wise with Leading Indicators and Consumer Sentiment.
The silver market right now does not appear to be driven by the data-but rather by the geopolitical landscape as well as commentary by Ms. Yellen and the Fed. Looking at the geopolitical situation , it has been rather quiet in recent weeks given the various conflicts going on around the world. The civil war in Iraq, the situation in Ukraine, tensions with North Korea and the situation in Israel all seem to have somewhat faded from news headlines. While this may not last, gold and silver are finding it more difficult to attract buyers in the meantime. Especially in the face of higher stocks that seem determined to keep working their way up.
Have we seen a false breakout in silver? It is too early to tell. It does appear, however, that some of the recent upside seen in silver and gold was largely speculator driven and not the result of additional physical buying of the metals. Unless that increase in physical buying is seen by larger market players, the precious metals markets may have a tough road ahead to the upside. For now, it would appear that more downside is potentially on the horizon for silver. The $20.50 area could potentially be the next target for the bears, while below that the $20 level may provide support as it is the top of the previous trading range.