Silver Market Update (1-9-2015)

Not much happened in the silver market in the week over New Year, but now that 2015 is under way positive things seem to be happening. There have been a few false dawns over the past few months, so we’re not counting any chickens just yet, but for silver investors last week looked pretty good. From the previous period’s close at $15.79 the spot price rose slightly over weekend trading then lifted off strongly on Monday, peaking at $16.55 before dropping back on Thursday. A final rally Friday saw it end the week at $16.51. That’s 72 cents up, a gain of close to 5 percent. It’s not earth-shattering but it does look healthy. If the market can stay that shape for another week or two things will be looking a lot brighter.
Silver followed roughly the same trajectory as gold over the week, and like gold it seems to be back in tune with the equities markets. The Dow Jones started the week with a dip, then recovered – that’s when silver fell – before tailing off again. If the historic link between metals and stocks is rebuilding itself then we can go back to using the health of shares as a useful predictor of metal prices. That would be encouraging, because there are quite a few jitters in the economy right now thanks to pressure on the US oil sector and continuing worries in the Eurozone. The main stock markets continue to climb but that growth isn’t as stable as it was just a couple of months ago – temporary dips are becoming more frequent. Investors seem to have doubts about the safety of equities and the obvious solution is to move some money back into metals as a safe haven.
Meanwhile other commodities continue to suffer. The oil markets were slightly calmer last week, with both standard and Brent crude continuing to fall but much more slowly. Brent is now selling at $50.11 per barrel and WTI is below $50, but last week saw the rate of decline slow sharply and it may be nearing the bottom of the market. That’s mixed news. If prices recover it will be good for the hard-pressed US drilling sector, but most companies will see costs rise and share prices slow down. On balance more expensive oil is likely to be good for silver.
Overall things look cautiously optimistic for silver. There seems to be very firm support at $15.50, as we’ve seen the price rebound from that level repeatedly, and with no new sources announced and demand still healthy that should creep up. The gold-silver ratio is still out of its normal range and we expect it to tighten over the next few weeks; that should bring prices up close to $17. After that the best guess is that it’s all down to the rest of the economy. Hard figures on the holiday retail season should give some clarity; if consumer confidence is still weak expect silver to pick up sales as investors look for some insurance.