Silver Prices Are Now Eying $13.80, PMI On Tap

2015-11-23 12:39:00

Alejandro Zambrano, Market Analyst

Talking Points

Silver prices slide on hawkish Fed comments
The trend is bearish below $14.40 and we may reach $13.80, and then $13.50 over the coming weeks

Silver prices fell to new yearly lows as trading opened for the new week. The reason for the last price decline is said to be comments by San Francisco Fed President John Williams. His comments, but also comments by his colleagues last week, strengthen the notion of having a Fed rate hike this December.

STRONG CASE FOR DEC. RATE INCREASE IF DATA HOLDS: FED'S WILLIAMS
LABOR MARKET DATA HAS BEEN ESPECIALLY ENCOURAGING: WILLIAMS
WILLIAMS: DATA HINTS CORE INFLATION MEASURES MAY BE FIRMING UP

As traders position themselves for a rate hike in the U.S. and a rate cut by the ECB, U.S. yields have been outperforming their peers, which is bearish for Silver prices as the Dollar grows stronger.

Technical outlook

I expect silver prices to drift lower as long as price is being capped at $14.40. Traders not already short near the highs of last week will probably wait for a pullback to the $14.09 – $14.20 range before turning bearish. Price may reach the August 20, 2009 low of $13.80 and $13.50 in the case that $13.80 does not limit the slide.

Today, we keep an eye on U.S. Chicago Fed Nat Activity Index, est. 0.08 and U.S. Markit Manufacturing PMI, est. 54. Better than expected readings may prompt a lower silver price as better than expected data is assumed to boost U.S. interest rates. Whilst bad data may sting the Dollar and boost Silver, it is not expected to break the overall bearish trend.

Upcoming Risk Events, GMT

13:30, U.S. Chicago Fed Nat Activity Index (OCT), est. 0.08

14:45, U.S. Markit US Manufacturing PMI (NOV P), est. 54

15:00, U.S. Existing Home Sales (MoM) (OCT), -2.7%