Silver Market Update (2-23-2015)

Silver looks to be on a real roller coaster ride at the moment; after a healthy recovery the week before last, the spot price slumped badly again last week. There was very little movement on Monday, probably due to the long weekend in the USA, but on Tuesday the price dropped abruptly from $17.31 to $16.52. It then sat there until Thursday before starting to slide again, closing the week at $16.24. That’s $1.10 down on the Friday before, roughly a 7 percent drop. It’s the biggest weekly fall since December and drives home the point that the volatility in the silver market hasn’t gone away. Some of the volatility can be explained by unstable market conditions; some can’t.
The big financial news last week was the continuing Eurozone crisis. The new government of Greece spent the week trying to negotiate a new bailout package, to keep their economy afloat until the summer. There’s a real danger that if they don’t come up with a viable plan Greece could end up being cut off from European emergency liquidity support, which would pretty much force the country to leave the Euro. Many analysts think this would seriously weaken the single currency but Germany’s finance minister takes a more bullish view – he thinks the Euro would rise with the inefficient Greek economy cut away. That may have persuaded speculators to buy Euros instead of silver last week. It’s going to be an issue that keeps coming up for at least the next few months, too. If Greece manages to get its spending plans approved this week they still have to pay some serious debts in March, then again in July. Speculation about them leaving the Euro isn’t going to go away for a while.
Meanwhile the oil markets, which had been recovering recently, fell back again last week. WTI crude dropped below $50 a barrel again and Brent is trading for just under $59. It’s unlikely the oil price will crash like it did in January but even a minor fall isn’t going to do much for investor confidence right now. That should be nudging buyers back towards precious metals but, if it is, silver certainly isn’t seeing the benefits.
Another cloud on the horizon is the possibility of a US interest rate increase. The Federal Reserve have already put this off more than once, keeping rates low to stimulate the economy, but it’s likely to rise at some point in Q2 of this year. Rising interest rates are usually bad for precious metals and other assets that don’t pay any interest, so the result may be more downwards pressure.
A fall as steep as last week’s raises the possibility that silver could drop back to a low around the $15 point. Like gold a downward trend seems to have set in, and it’s at least possible it could last for several weeks. For now the best plan is hold on to what you have and look to buy cheap if the price approaches $15.