Silver has been an incredibly interesting commodity to watch as of late, and for good reason. Throughout the first half of the year, the price of the precious metal skyrocketed. However, more recently, we’ve started to see declines as a result of a strong economic signal out of the United States. US jobs far surpassed expectations. Today, we’ll talk about what we saw from the US jobs report, what this has to do with silver, and what binary options traders should watch while trading the precious metal ahead.
US Jobs Blow Expectations Out Of The Water
As mentioned above, the US jobs report for the month of July was released late last week, sending silver downward. At the end of the day, the report was overwhelmingly positive. During the month, analysts expected that the United States would add between 175,000 and 180,000 jobs to its economy. However, the report that was released last week showed that jobs growth for the month of July came in at 255,000. Not only did this figure far surpass expectations, it also surpassed the key 200,000 job additions mark. When the US economy adds 200,000 or more jobs consistently on a monthly basis, it is considered to be doing well.
What Does This Have To Do With The Price Of Silver?
While it may seem as though the price of silver and jobs growth in the United States are two completely different topics, that notion simply couldn’t be further from the truth. In fact, any economic data out of the United States and around the world can lead to big movement in the price of the precious metal. Here are some of the reasons that this jobs report plays such a massive role in the silver market….
- USD – First and foremost, it’s important to keep in mind that silver is priced using the USD. This means that when the value of the USD climbs, the cost of silver outside of the United States climbs as well. This leads to declines in demand, and ultimately declines in the price of the precious metal. Adversely, when the USD falls, silver becomes more accessible around the world. This leads to gains in demand and gains in price. As we know, a currency is only as strong as the economy it represents. With the strong economic data out of the United States, we can expect for the USD to head upward, putting pressure on the value of silver.
- Safe Haven Demand – Silver is also largely considered to be a safe haven investment. This means that when economic and market conditions are worrisome, investors look to silver as a way to keep their assets safe. However, with the strong economic conditions displayed in the United States, safe haven demand heads downward, also adding resistance to the price of the precious metal.
- Federal Reserve – Finally, this jobs report was overwhelmingly important. That’s because the Federal Reserve has been planning to increase its interest rate this year. However, negative economic data in the United States and around the world has hindered these plans. Nonetheless, some experts believe that the strong jobs report will give the Fed just what it needed to raise its interest rate. A higher Federal Funds Rate would send the value of the dollar upward, leading to further declines in the price of silver.
What Binary Options Traders Should Be Watching For?
As with any other asset, the truth is that silver can go in either direction. As a result, there are a couple of key factors that binary options traders should watch when trading the precious metal. First and foremost, keep a very close eye on US economic data. In the week ahead, we have a relatively light economic calendar. Nonetheless, the jobless claims report will come Thursday followed by retail sales on Friday. Both of these reports could lead to big movement in the price of silver. Also, keep a close eye on global economic conditions. While US jobs was a great report, silver is heavily dependent on worldwide conditions. With a-lot going on in Europe and Asia, we could see things shake up if either of these economies releases data.
[Image Courtesy of Wikimedia]
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