Silver Market Update (10-6-2014)

It’s been another solidly downwards week for silver, with the price trending downhill as soon as the markets opened on Monday. Tuesday and Wednesday saw a small rally, but then the slide resumed to a closing price of $16.86. That’s a full 80 cents down on the previous period, one of the worst weekly performances we’ve seen from silver all year.

Like gold, the main driver on the silver spot price last week looks to have been the equities market. It was a mixed week for stocks, with the Dow Jones finishing slightly down overall, but the low overall movement sat on top of some major and rapid swings. Most notably the Dow dropped abruptly on Tuesday, leading to both silver and gold gaining value as investors went looking for a safer haven for their money. However when the US markets opened on Friday morning the Dow climbed again, making up most of the ground it had lost, and silver fell back. Again like gold, its renewed slide carried on well below where it had been before the rally.

Many analysts are swinging behind our feeling that the market has lost confidence in silver and further falls are likely. How far it drops depends on the stock market; if the economy keeps recovering at its present pace we expect equities to perform modestly well, although there’s nothing in this year’s figures to set the world on fire, and in that case silver could drop below $15 and perhaps even as low as $12. On the other hand another setback like the negative growth figures we saw for the first quarter of 2014 could shake things up, and in that case we’d expect to see silver make a real rally. The third quarter’s growth figures should make interesting reading for anyone interested in commodities.

Overall last week wasn’t spectacular for any of the markets and pretty negative for most. Equities only lost out slightly; commodities suffered much worse. Even oil dropped again, with both crude and Brent shedding several dollars a barrel. This seems to indicate a general lack of confidence, which is interesting given the generally positive signs from the US economy. September’s job creation figures are now out and show almost a quarter of a million new jobs over the month, bringing unemployment down to 5.9 percent. Of course there are hints of trouble elsewhere, most obviously in the Eurozone where some of the larger economies look like they could be facing a triple-dip recession and a new debt crisis is still a real possibility. That’s bound to have knock-on effects if it happens, and one of the effects of a collapse in European equities would likely be a boost for silver.

Right now the best hope is that silver will find some support above $16.50 and start to rebuild from there. However there’s no guarantee of that and in any case it’s unlikely the price will rise above $18 in the next few months, so if you’re looking for short-term profit look at selling any time it goes above $17.50. Otherwise hang on and wait for confidence to come back.