Silver Market Update (12-7-2014)

The silver spot price has been on a real roller coaster over the last few months – with the problem being that a roller coaster mostly goes down – and recently it’s looked as if it was heading for a long-term collapse. Week after week of falling value has made a lot of investors wary of putting their money into silver and that’s the sort of thing that builds up its own momentum after a while. So after a disastrous end to November, with 5 percent wiped off its value in a single week, it’s a relief to see the graph tick upwards again. After closing the previous period at just $15.58, last week it managed to climb back up to $16.28. That doesn’t quite make up for the week before but, once again, at least it’s heading the right way.
We’re actually slightly surprised to see silver rising last week, because share prices are also going up and precious metals usually go the opposite way to the stock market; if people are buying silver it’s because they see it as a safer bet than equities. However both the Dow Jones and FTSE 100 rose over the period, in the case of the FTSE perhaps rebounding from the commodity shares sell-off the week before. Whatever the reason, the major indexes showed respectable growth but silver still managed to climb. The same can’t be said for other commodities, with crude oil taking another hammering. WTI crude slipped below $66 a barrel and Brent finished the week at $69.07. That’s down from a peak of close to $130 in 2012, and over $100 as recently as this September. In the medium term that should be good for business and share prices, and probably bad for silver. Right now it means oil isn’t all that attractive for anyone looking to invest in commodities, and that may have helped silver pick up slightly.
One thing to note about silver’s performance last week is that the rise hit a plateau on Thursday then dropped back 20 cents by Friday’s close. Gold was also hit at the same time and the most likely cause was the release of the latest non-farm payroll report, which showed the rate of new jobs exceeding predictions. Like the drop in oil that’s good for business but bad for silver; it’s also a hard set of data, which probably explains why it had an immediate effect.
There’s no doubt that the silver price is a lot more volatile than usual, so it’s hard to say what this week will bring. The key indicator to keep an eye on is still the stock market; if that performs strongly, which it should thanks to the non-farm figures, expect silver to fall again. On the other hand there are increasing jitters in Europe, with the ECB conflicted over whether to go ahead with quantitative easing in the face of German opposition, and that could place a brake on stocks. In any event this is not a good time to sell silver; the question is whether to buy or not.