Silver Market Update (6-8-2015)

Despite some optimism at the end of the previous period silver fell again last week, when the upward movement we’d seen developing abruptly turned down on Wednesday. That was followed by two days of serious losses before a small upswing brought it to a closing price of $16.125. In short, over the week it’s dropped by 57.5 cents, or just over 3.5 percent. That’s substantially more than the 2 percent fall the previous period and suggests that investor confidence might be flagging again. The pattern of movement tracked gold fairly closely for most of the week, right up to when the silver spot price managed to rebound slightly on Friday, but in hard numbers it was a much worse performance. That’s bound to turn a lot of people away from buying silver and rush others into selling their stocks.
As we’ve seen a lot in recent months silver didn’t follow the equities markets very closely last week. In fact the US and UK markets both led silver down, with the FTSE 100 taking the worst losses – its biggest one-week fall so far this year. US shares are probably still suffering from the release of the revised, and disappointing, Q1 growth figures; that’s going to cause worries about how Q2 will look, with exporters possibly looking at another contraction. The situation outside the USA is more complicated with the ongoing Greek crisis likely playing a role. Athens has managed to shuffle some major debt payments back another few weeks, prolonging the uncertainty, but it’s unlikely they’ll be able to do that for much longer. If Greece drops out of the single currency it will probably rocket against the dollar, which would be very good news for US exporters but probably a lot less so for silver.

On the more positive side for the metal, many analysts are starting to take a critical look at the overall shape of the economy and some of them suspect that generally good nonfarm payroll figures are hiding some weaknesses. Many of the new jobs listed are not full-time ones that can fully support anyone; the pattern of serial part-time work is becoming a lot more common. If that’s the case then there are underlying problems that make a safe investment like silver seem a lot more attractive than the current price suggests. With little competition from the still-sluggish oil market, a downturn in share prices could give silver a serious nudge upwards.

There’s no doubt that silver’s performance over the last three weeks has been poor, but it’s not as bad as it was for much of 2014 and there’s no real market trend that should be pushing it down. It seems likely that a lot of the recent fall is down to a simple lack of confidence again, and the price really should be safely above $17 by now. We don’t think this is a good time to sell unless you’re holding a stock you bought a while ago; it’s unlikely you’ll be able to buy back in at a much lower price.