May silver is trading $16.975 down 32 cents on the day. All eyes are on employment situation data this Friday. A positive number will continue to reinforce the Feds agenda that tighter monetary policy is the path going forward. The Fed will release their minutes next Wednesday and market participants are anticipating a rate hike. Given the positive ADP report, not seen since Oct 2015, the job report will most likely will have positive outcome on Friday. Also, next week, we shall expect the Fed to raise their benchmark rate an additional basis point, so the silver market is pricing another rate hike in March and possible Fed hint on subsequent rate hikes. No surprise here for metals selling off.
With geopolitical risk on the sideline for now, there is nothing coming to silver’s rescue. As I stated before, continued turbulence out of Asia warrants monitoring the geopolitical concerns that may arise over the South China Sea.
From technical prospective, silver futures in May contract are trading into the box as shown on the chart below. It’s a move back 50-60% retracement from a recent high and resent low. Markets are forward looking, and in my opinion, much of this rate hike talk will most likely be priced in sooner rather than later. If the box holds, market would most likely rebound from these levels. Approaching the market using option strategy might be the way to participate in the metals at this point in time.