Silver Market Update (3-7-2015)

From a fairly positive week for silver that came before it, last week saw another sharp turn for the worse with the spot price falling steadily all week. The worst losses came Friday when, following the same path as gold, the bottom abruptly dropped out the market and the price plummeted from $16.10 to $15.75 in a matter of four hours. It regained a few cents in the afternoon to finish the week at $15.925. That’s a drop of 71 cents over the week before, another serious shock for a price that wasn’t doing all that well to begin with.
Normally, to explain a drop like this, we’d look to the stock markets and expect to see a strong performance. That definitely wasn’t the case last week. In the UK the FTSE 100 reached a new record high on Thursday, but ended the week slightly lower than it had started it. Back home the Dow Jones Industrial Average fell almost without a break, only managing to tick upwards briefly on Thursday before falling again for an overall 300-point loss on the week. The weak Euro – it’s down below $1.09 at the moment – is causing exporters concern but overall the US economy is actually looking quite good. The latest six-month nonfarm payroll figures are the best since March 2000, bringing the unemployment rate down to a better than expected 5.5 percent, and inflation has finally started to ease up. That’s raised the prospect of the Fed finally carrying out their long-anticipated interest rate rise, which will have an impact on a non-interest bearing investment like gold. While wages didn’t rise much so far that’s expected to pick up in the near future, boosting inflation even more.
Meanwhile the oil markets remain sluggish, with WTI crude stubbornly remaining just below $50 a barrel and Brent looking stuck a few cents below $60. This lack of movement doesn’t leave a lot of room for profit, so oil isn’t an attractive investment right now. That leaves precious metals as the best option in the commodity sector but it doesn’t seem to be enough to boost them significantly.
So silver is now back down to where it was in early January, and it’s natural that worries about a loss of investor confidence are returning. It will take another couple of weeks as bad as the last one to get down to a new one-year low, but right now that can’t be ruled out. If traders are convinced it’s weak the price will continue to fall until something happens to rebuild confidence. A downturn in the equities market could do that, and a share slump isn’t something anyone would rule out. Despite the healthy US job creation figures there is still a lot of instability in the global economy, especially in the important Eurozone export market. Greece seems to be already on the verge of a new crisis and the rest of the Eurozone isn’t growing very convincingly either. The best advice for the moment is to hang on, buy silver when the price looks right and wait for medium and long-term gains.