Silver Market Update (6-15-2015)

It’s been yet another disappointing week for silver and many investors are starting to suspect it’s heading for the same place as it was through late 2014. There’s no real reason for silver to be falling right now but that’s exactly what it’s doing, and it seems to have broken loose from gold again too – the gold/silver ratio, which has been tightening as the two metals tracked each other closely, widened sharply again last week. The end result was that silver followed gold until Wednesday then seemed to switch to tracking the Dow Jones instead, ending the week with a rapid fall that took it back below where it started. The closing price on Friday was just $15.955, 17 cents down on the week before. It’s a much smaller drop than some we’ve seen the last few weeks but still troubling. It does look like investors are losing their confidence again.

The Dow Jones looked healthy last week, after a slow start on Monday, right up to Thursday when it suddenly turned round and fell dramatically. Silver followed it down, suggesting that both were affected by something else. It’s probable the Dow rose as analysts started talking up the Q2 US growth figures, which look like being a lot better than expected, then fell as rumors spread that the Federal Reserve is on the point of going forward with its long-delayed interest rate rise. That makes sense from the Fed’s point of view because there are signs of wage inflation picking up in the economy, but it’s likely to bump up the already-strong dollar and make life difficult for American exporters. Meanwhile the Euro is still stuck around $1.12 as the Greek debt crisis drags on. That’s likely to change by the end of this month though, because Athens is running out of wiggle room. One way or another, two weeks from now the issue of Greece’s Euro membership should be decided and the single currency will react strongly to the news.

Meanwhile the oil market, which had shown some signs of starting to recover, looks like it’s fading again. WTO has fallen back below $60 a barrel, closing the week at $59.96, while Brent fell by more than 1 percent to end at $63.87. The prices for both are still stuck inside a narrow band that offers little opportunity for profit, so silver doesn’t have much competition from there.
Unfortunately it doesn’t seem to make a lot of difference right now. Silver should be doing better than it is and there certainly isn’t any reason for it to start diverging downwards from gold. Both are under pretty much the same market pressures, but gold steadied last week and managed to make small gains while silver dropped even lower. It’s difficult to break out any reason, especially with the futures market looking much healthier than trading in physical metal. If you’re holding silver there probably isn’t any reason to sell unless you bought at a much lower price, so wait until the price bottoms out again then start building up stocks.