Several important events are scheduled for this week and many investors have chosen “wait and see” position.
On Wednesday OPEC meeting will be held; on Friday US labor market data will become known; on Sunday Italian referendum will be held.
Wall Street Journal index, which tracks the position of the USD against a basket of 16 major currencies, has increased by 0.09%, up to 91.53. Although upward momentum in the USD has slightly weakened, bullish trend still continues.
The prices of the precious metals have been declining sharply since the beginning of this month after the presidential election in the United States.
President Donald Trump plans to expand fiscal stimulus and lift restrictions for production of energy resources in the United States. Investors’ expectations of the interest rate hike have increased due to the positive US macro-economic statistics. The data on employment, retail sales and housing market are all positive showing recovery of the American economy.
According to futures for the Fed interest rate, probability of monetary policy tightening in December is 98%.
The rate hike always leads to the decline in prices of the precious metals, including silver, because precious metals do not bring interest income, and cannot compete with the assets generating income, such as government bonds.
Previous rise in investors risk appetite and continuing withdrawal from the safe-haven assets resulted in the rise of the USD and sales of the precious metals.
With the opening of today's trading session, the USD is traded in a narrow range. Silver prices are slightly declining again after the two-day correction.
Last week the price of silver fell to the lowest level (16.16 USD per ounce) since June. Spot price of silver at the opening of the European session on Tuesday was at the level of 16.60 USD per Troy ounce.
Expectations of the interest rate hike in the USA have triggered the decline in prices of the precious metals, despite the continuing political and economic instability in the world.
However, it is possible that the decline in the precious metals have been incorporated in the prices and after some decline the price of silver and other precious metals can start to grow after the Fed’s meeting on 13-14 December.
It is also possible that the prices of precious metals have hit the bottom and traders need to be extremely careful when opening short positions.