Silver Market Update (3-3-2015)

Last week saw yet another turnaround for silver, although it’s hard to say how long it’s going to last. Following last week’s big drop the spot price slipped down when trading opened on Monday, then recovered strongly on Tuesday and continued to rise more slowly through the rest of the week. It ended Friday at $16.63, a gain of 39 cents. Obviously that doesn’t come close to making up for the previous week’s losses but it does show that a renewed long-term slide isn’t inevitable. It’s looking as if some support has built up around the $16.25 level, so hopefully any more dips in the immediate future won’t be as severe. Of course with the recent unpredictable market there are no guarantees of that.
The better performance of silver this week could be due to the movement of gold, which also saw a rise in price. While the link between the two metals still isn’t as strong as it traditionally is, there have been signs that last year’s decoupling has partly reversed itself. If gold continues to rise we should expect silver to rise, too.
Silver also likely got a boost from the generally weak performance of the equities markets. The European exchanges showed modest gains but the Dow Jones, after an initial rise, dropped back late in the week to just a few points above where it started. The mood among equities investors is mixed just now, with the Dow’s long rise faltering and doubts continuing about the future of the European single currency. There are no immediate signs that the Federal Reserve is thinking about raising interest rates, as inflation is still below their target, but in the medium to long term that’s almost inevitable and it will have an impact on share prices.
The slow oil market likely also helped silver recover some ground. Crude prices seem to have stabilized for the moment after slipping back the week before, but for the moment they don’t show any signs of rising. West Texas is still slightly below $50, while Brent was trading at $62.58 on Friday. It doesn’t look as if oil is going to fall back to its previous lows but this sort of performance reduces its attractiveness as an investment and that helps silver.
Last week’s gains for silver certainly don’t signal an end to volatility and we expect to see the price keep fluctuating for the near future, but if the support near the current level holds that will be a solid base for an increase later in the year. In the medium and long term, as long as it continues to track gold, the prospects are good. Demand for both metals remains strong and there’s no sign of any production increase on the horizon, so pressure on prices should all be upwards. For now, with the price not looking like dropping back to last year’s lows, there’s no reason to sell unless you’re sitting on a stock bought when the price was lower, so take advantage of silver’s current cheapness to build your portfolio.