Silver Market Update (7-25-2015)

Most attention was focused on gold last week, as the spot price took a real hammering from the markets, so the fortunes of silver got a lot less coverage in the media. That’s understandable because movements there were a lot less startling. Silver climbed Monday, reaching $14.99, then fell back as the week went on to a low of $14.62 on Wednesday. It started climbing towards the end of the week but had a volatile day Friday, reaching $14.35 at one point before bouncing back to end the period at $14.74. That’s just ten cents down on its previous close, and while it’s too much to say this is a good sign in the current market it’s a lot better than it could have been.

We suspect that a bad week on the equities markets has given silver some much-needed support here. Gold’s sharp decline had other reasons but these were specific to that sector and silver looks to have escaped their impact. Both the Dow Jones and FTSE 100 fell steadily through the whole period and that usually nudges investors towards commodities. With oil prices falling again – WTI crude is down to just $48.14, with Brent closing the gap at $54.62 – that leaves precious metals looking tempting, but facing some stiff competition from government securities and the currency markets. With Greece looking like it won’t be ejected from the Euro right now worries about contagion ripping the single currency apart have faded, and that makes high—yield bonds from Italy, Spain and Portugal an attractive investment. With silver not offering much in the way of returns right now it’s hard to match that, but the situation could change rapidly if Greece flares up again – and that’s likely. The current situation is only a time-out, with a more solid deal required by the end of August. Any renewed doubts about the integrity of the Eurozone could spark a move back to commodities and that should benefit silver.

There seems to be a clash of influences here. The US economy is generally going well, which is bad for silver, but the strong dollar is still causing trouble for exporters. We’re seeing a serious slowdown in the Chinese economy and the Eurozone is still stagnating, both of which should boost silver’s value as a safe haven, but at the same time confidence is still weak and there’s no sign of a change of course on the horizon. It’s likely that FOREX trading is sucking a lot of investment away from silver; the Euro looked to be recovering after the latest Greek deal was struck but it’s been an unsteady rise and a Euro is still worth around $1.10. There’s a lot of potential for gains as the rate fluctuates and, with any profit from silver a mid-to long-term prospect, the attraction is obvious.

In the current conditions selling silver isn’t likely to bring much of a return unless you’ve been holding it for a long time, so it’s probably best to hang on to your holdings until the price recovers. When it does start to rise sustainably that’s the time to buy in at a bargain price.