Silver Market Update (11-24-2014)

Two weeks ago silver ended trading on a sharp upswing, and that continued last week. An early surge was interrupted by a dip on Tuesday and Wednesday, but by Thursday morning it was climbing again and by the time the markets closed on Friday the spot price stood at $16.445. That’s just a 12.5 cent increase over the previous period but it’s still another step in the right direction after a long and alarming slide.
It’s difficult to pin down the exact reason for this rise by looking at the market as a whole. Oil prices recovered slightly last week following a weeks-long decline of their own, with both regular and Brent crude managing to gain around 1 percent. If they had continued to slip we might have expected to see silver pick up some business from investors looking for a safer alternative but that factor obviously isn’t in play here. With the Dow Jones and FTSE 100 both posting modest gains a flight from equities can’t be responsible either. Instead we think the upward pressure is coming from a realization that silver is drastically underpriced right now. Confidence looked to have been seriously dented for a while, and investors were shedding silver simply because it was falling, but there was never any real reason for it to dip as low as it did. Industrial demand remains strong and no significant new mines have opened, so long-term prospects remain good, and it looks like the markets are now acknowledging that.
There’s no doubt that silver has taken a real beating this summer and fall, and many investors will be wary about the prospects of it starting to fall again. That’s not a surprise after the way it blew through so many predicted levels of support, but there’s a real chance that the recovery we’ve seen over the past couple of weeks is real. US economic figures are still looking fairly good, so we expect equities to hold up well at least until the holiday retail figures are in – although the upcoming Black Friday could cause some jitters. However there are clouds on the European horizon, with many analysts arguing that the Eurozone is in line for a renewed recession. If that turns out to be true – and growth figures are shrinking in every major EU nation except the UK – a flight from non-US equities is likely and silver would be ideally placed to benefit. A low but rising price is a very tempting combination.
Obviously there are no guarantees here and silver could fall again this week – we don’t see any reason for that to happen, but there was no reason for it to end up so low in the first place. However it does look like a more positive trend is starting to develop, even if it’s not as strong as what we’re seeing for gold. Right now there’s no reason to sell silver but if this recovery continues for another week or two that would be a very clear buy signal.