Silver Market Update (1-23-2015)

Silver’s recovery, which picked up some serious speed two weeks ago, continued at a slower but still solid pace last week. The spot price rose for most of the period, peaking above the $18.40 mark on Thursday then fluctuating through Friday to end the week at $18.295. That’s a 51 cent gain over the week before, a touch under 3 percent. Silver’s now more than $2.50 up on where it started the year, a very encouraging sign after months of disappointing performance. There’s no guarantee this recovery will continue of course, but so far it’s looking quite healthy.
Silver probably profited from weakness in the equities market. Non-US indexes had a reasonable week, with the German DAX and British FTSE 100 managing a steady rise, but the Dow Jones took a dip which, while not as deep as the ones we saw in October or December, was more prolonged and doesn’t look to be over yet. We’ve noticed that drops in the Dow have been getting more frequent recently and this one has the potential to bring its steady rise to an end for a while – it doesn’t seem to be bouncing back as quickly as the last couple of times, possibly a sign that investor confidence is wavering. Weakening currency in the EU, a major export market for US firms, isn’t going to help – a year ago a dollar would get you 74 Euro cents, but now it’s 89 and rising. Fading confidence in equities is likely to boost demand for silver, which has been holding up quite well anyway, so we expect the spot price to do well over the next few weeks.
One note of caution comes from oil prices. Crude seemed to be on an endless downward slope two weeks ago but there are signs it might have reached a hard floor. West Texas Intermediate lost value last week, but only a matter of cents instead of the multi-dollar falls we’d been seeing – it’s now trading at $45.59 a barrel. Brent managed to claw a few cents back to end the week at $48.79. The negative pressure on oil seems to be fading and Saudi Arabia, the main driver of the price slump, now has a change of leadership to focus on instead. That means the other OPEC members, who’re feeling squeezed by the low price, might get their way. Crude has fallen a long way and even a $20 a barrel recovery would be a big attraction for investors, so that might impact demand for silver.
Right now silver is still undervalued and has more ground to make up, but it’s definitely heading back into more realistic territory. In percentage terms it outperformed gold again last week as the gold-silver ratio continued to narrow. If that trend continues it’s probably good for a spot price just past $19; anything beyond that is going to depend on the rest of the market. Overall things are looking a lot brighter for silver than they did just a few weeks ago, and if you’re ready to buy in there could be some nice profits waiting for you.