Silver Market Update (5-03-2015)

Last week we said it wasn’t a good time to sell silver, and that turned out to be even more right than we knew. Strong weekend trading saw silver rising steadily when the markets opened on Monday and by Wednesday night it was at $16.82, more than a dollar up on its previous close. Unfortunately it dropped back sharply on Thursday and finished the week at $16.095, but that’s still just under 35 cents higher than the Friday before. A surprising performance in some ways, but also an encouraging one.
Probably the most puzzling thing about silver last week is why it dropped together with the main equities markets. The Dow Jones climbed on Monday but fell for most of the rest of the week, with a rally on Friday. London’s FTSE 100, more exposed to the shambles of the Eurozone, headed down right out of the gate but also managed to pick up a few points at the end of the week. A performance like that should have seen silver rise strongly, but that’s exactly when it was losing value. Over the past few weeks we’ve seen the inverse link between commodities and equities seem to rebuild itself but now it looks like it’s failed again. The most likely reason for that is a sudden flurry of activity in the currency markets, with the embattled Euro suddenly gaining strength against the US dollar. The single currency, which has been stuck at between $1.06 and $1.09 for weeks, suddenly climbed last Friday and ended the week nudging $1.12. That’s bound to have optimistic investors stocking up on Euros in the hope of cashing in, but it’s a risky move. At this point the best hope for a Euro recovery is the ejection of Greece; that country’s debt problems are dragging the whole area down. If Europe’s politicians get their way and hold the system together expect the Euro to fall sharply again at the news. Of course that will also attract investors to FOREX, so whatever happens it’s likely currencies will take money from commodities in the short term.
Any move back to oil is likely to be a longer term event. After some signs of life in late April the oil market seems to have stagnated again, with little in the way of movement last week. West Texas Intermediate is still sitting a few cents above $59, while Brent crude is a little above $66. Oil prices do seem to be slowly rising but not fast or reliably enough to create much excitement, and there’s no sign of a policy change that would stimulate a more rapid recovery; keeping oil cheap is still a key tool for containing Russia.
Overall we’d say this turned out to be a good week for silver, a very welcome development after a couple of bad ones. It’s obviously too early to say the price has turned the corner but at least this is a sign that confidence hasn’t been broken. This week will hopefully make the picture a bit clearer.