Silver Market Update (7-4-2015)

Silver slid again last week, although not by as much as the week before. After an early slide, then an erratic recovery on Thursday, it finished the period at $15.685. That’s a drop of 6 cents over the week, well under half a percent, so while it’s slightly disappointing that the spot price didn’t recover at all it’s not a significant downward movement. Considering that most of the other global markets dropped, some of them sharply, silver didn’t really do too badly in comparison.

The most active sector last week was the equities market. At a global level we saw a general fall, with the major European indexes all down and China’s Shanghai Composite marking its biggest three-week fall in over 20 years – it’s down 29 percent since mid-June. This should all be excellent news for silver, which along with gold is a traditional safe haven from falling share values, but so far it’s not worked out that way. One possible reason is the contrasting situation in the USA, where the Dow Jones managed to close the week 134 points up. That reflects the pain US exporters have been suffering from the strong dollar, which has cost them a lot of sales in the important Eurozone market. There’s a good chance the Euro will pick up value sharply this week on a Greek exit, and if it does that will be a major boost to the US economy at the expense of European manufacturers (which is probably why their exchanges have been seeing losses). That outcome is far from certain though and the result is a lot of market nervousness. China’s stock weakness is likely down to a combination of that nervousness and some recent restrictions on margin calls, all piled on top of a recent slowdown in exports. Chinese sales to the USA are still healthy because the high dollar makes for tempting prices, but they’ve lost a lot of business in Europe thanks to the single currency’s weakness.

Uncertainty does have potential benefits for silver. Many analysts expect the Euro to be strengthened by a Greek exit, because Athens has been overspending wildly for years, but there’s always the possibility of contagion to the other Mediterranean economies. If the Euro immediately runs into another crisis commodities are going to look very tempting and silver could be well placed to gain from that. There’s a good chance that by the end of this week we’ll have an idea which way it’s going to swing.
Meanwhile oil prices have been weakening again, with a barrel of WTI down to $56.93 and Brent at $62.07. That’s a loss of just over a dollar for the North Sea crude but close to three for WTI, and while prices aren’t likely to hit the lows of a few months ago this is certainly a hint that they won’t be rising soon.

So overall it wasn’t a great week for silver, but not really a bad one either. It’s managed to pretty much hold its value in a very rough market, and there’s some potential for a rise in the near future.