Silver Market Update (1-16-2015)

Silver didn’t have a very good time in 2014, and there have been a lot of worries that it was suffering from a long-term loss of confidence that would keep prices artificially low. Those fears must have faded slightly now though because last week turned out to be an extremely good one. From an opening price of $16.54 on Monday – just a fraction up over the weekend from the previous period’s close of $16.51 – it climbed strongly as soon as trading began. The price stagnated on Wednesday and Thursday before climbing again on Friday, finally ending at $17.78. A seven-day gain of $1.27 is impressive for silver at any time, especially from such a low base, and it shows that confidence certainly wasn’t lacking last week. That’s the highest the price has been since it dropped off a cliff last September.
Equities were down overall last week, which might explain part of silver’s rise, but that probably isn’t the whole story. In fact while at the weekly level it makes sense – shares down, silver up – that doesn’t hold up when the daily figures are brought in. Silver rose when the stock markets were rising and stagnated or fell when shares were falling; the difference in weekly performance is down to the fact that stocks fell faster and climbed back up more slowly.
What’s more likely is that persistent worries about the economic future are making investors take another look at precious metals. While equities are still on a rising trend it’s not looking as solid as it was just a couple of months ago, with volatility growing and sudden drops becoming more frequent. Overall the US economy isn’t in bad shape right now but there’s disquiet in both its major export markets – the EU and China. The Eurozone is still struggling to break free of the financial crisis, with the upcoming Greek elections threatening to throw the whole currency into chaos, and that’s probably fueling a move to precious metals among overseas investors.
Meanwhile oil prices show signs of leveling out, with Brent’s fall slowing last week and West Texas Intermediate actually managing to finish the period slightly up. They’re both still below $50 a barrel but that’s still a long way above the $20 Saudi Arabia said they’d be happy to drive the market to. Long-term, a return to more costly oil will depress share prices so stocking up on silver while it’s cheap makes a lot of sense.
One thing last week definitely did was start the gold-silver ratio on the way back to a more normal range. Gold rose, but not as fast as silver did, so the ratio is starting to tighten again. Even in a low market like this silver has been undervalued for a while and that probably explains why it climbed faster than gold did. If so there’s likely some more to come, and right now that makes silver an attractive option for a short-term investment. Don’t overlook the longer game though – stock up now and if the price gets back to where it was a year ago you’ll be 20 percent up.