Silver prices are flat today as the precious metals markets are trying to stop the recent bleeding. Precious metals appear to be continuing to suffer from a lack of risk aversion in the marketplace and higher stock prices. The SP500 appears intent on going even higher from here, and perhaps many investors are seeing the writing on the wall so to speak. Silver, and gold for that matter, are simply stuck in an uninspiring position currently and thus far there does not appear to be a sustainable rally in sight. While we would expect to see some short covering at some juncture, the notion of silver going even lower from current levels is entirely realistic.
While not much has changed in recent weeks, the silver market and precious metals do remain subject to headline risk. That being said, however, one has to wonder what type of headlines would be needed at this point for the metals to stage a significant rally. After all, the geopolitical landscape is anything but stable at this point, yet stocks continue higher while metals continue lower. Perhaps it is due to the shear amount of money that was sidelined for so long still finding its way into the marketplace, but whatever the case may be stocks are now looking like they are not finished. If this proves to be the case, silver and precious metals could see additional pressure in the coming weeks and months. It appears that until a large asset rotation begins, metals may stay on the defensive.
Against this backdrop of stronger equity markets, the silver bulls are also having to contend with the notion of higher interest rates. While many believe we will not see the first rate hike until sometime in the middle of next year, the possibility of a rate hike coming sooner certainly exists. If silver and gold couldn’t move higher with rates at zero the past several years, one has to wonder what may make them go higher if rates are on the rise.
Sub $19 silver may be on the way shortly. In fact, silver may attempt a downside breakout of the lows it has held over the past year. Should these lows give way, silver could see a significant leg lower in prices in the short-term. In fact, one can not rule out a move lower in silver for a re-test of the $15 level which was last seen in 2010. While this may sound dramatic, it is entirely possible but at the same time could potentially present a good long-term buying opportunity.