Silver Market Update (6-29-2015)

Silver’s apparent recovery stalled badly last week as the price fell steeply over the weekend, recovered through Wednesday then dropped again. It closed at $15.745, 34.5 cents lower than the previous week and a loss of over 2 percent. We’ve seen much worse weekly losses over the past year but following on from a couple of weeks when it seemed to have turned the corner this is definitely not what we wanted to see.
The best guess is that silver was pushed down by a lively currency market. Speculators are buying cheap Euros at the moment, as the single currency continues to slide against the dollar. It fell by nearly 2 percent on Monday, settling at around $1.117, and stayed there most of the week before beginning to fall again on Friday. As hopes fade of a solution to the Greek debt crisis it’s looking like the Eurozone is going to shed the bankrupt country in the near future, and that could easily push the single currency up by 10 percent or more. That would be a very attractive prospect for anyone who’d stocked up on Euros now. It would also be good for US exporters, who’ve been having a hard time recently, and that would probably depress gold prices. It’s hard to predict exactly what might happen though – there’s also the potential for contagion to push the Euro down even further, which would boost Eurozone equities but hit US ones.
Otherwise US economic news is looking good, with Q2 figures expected to show the economy returning to growth. That’s likely to help the Dow recover and depress US demand for silver. That might not be the case globally though. China, traditionally a major bullion buyer, looks to be coming off the top of a bull market. The Shanghai Consolidated Index posted its biggest loss in eight years this week as technology companies struggle to maintain exports, and most China watchers think it has a way to fall yet. The question is whether demand for silver in China will compensate for falling interest in the USA. If not we could see the spot price slip further in the next few months. The long-awaited Federal Reserve interest rate hike will probably drive bullion prices down too, as other investment vehicles become more attractive, and th smart money is on rates being raised in September.
The best hope for silver right now is a serious slowdown in one of the major economies, with China looking the likeliest at the moment. Precious metals are facing little competition from other commodities, with oil slightly down again – WTI is trading at $59.70, and a barrel of Brent is just $63.20. The alternatives to bullion are foreign exchange – which was quite lively last week – and equities, where the global picture is a lot more patchy.
At the moment we’re not recommending buying silver, as there’s a good chance it will fall more in the next couple of weeks. Any sign of it stabilizing would be a great opportunity to stock up though.