Silver Market Update (8-4-2014)

Silver has been surprising analysts for the last few weeks by managing to hold on to most of its value in the face of a rising equities market and positive economic figures, but that came to an end on Monday. As it’s been doing for months the silver spot price tracked gold closely through most of the week, rising briefly on Monday morning then entering a downslope that steepened dramatically on Thursday. Friday’s release of the latest nonfarm payroll figures slowed the fall slightly, but at that point silver and gold diverged; gold made up half of what it had lost during the week while silver continued down at a slower rate. The closing price was $20.33 per ounce, 26 cents down on last week’s close. That’s not much more than what it lost last week, but the downward progress was more consistent.

The drop in both silver and gold was predicted by many analysts, but they hadn’t accounted for this week’s sudden drop in stocks; the Dow Jones index dropped almost 500 points, wiping out essentially its entire gains for the year to date. Such a sudden drop in equities is likely to have a lot of investors thinking about moving their money somewhere safer, so it’s definitely possible silver could see a rally next week unless the Dow makes a dramatic recovery. While the nonfarm payroll data showed another decent month for job creation it wasn’t quite as good as had been predicted, and there are other worries globally. Iraq and Russia are both generating continued unease and there’s now the worry of Argentina defaulting on its considerable debt. That’s going to have an effect and it could be the boost that silver needs to get back to where it was. In any case continuing industrial demand will cushion the price and prevent it falling too far, but $19 is possible in the not too distant future unless there’s a turnaround soon.

Right now it’s still too early to sell silver if you’re investing in the medium or long term. In fact there are a few things to look out for that might be a signal to buy. Further debt issues in the EU could seriously damage investor confidence and prompt a buy-up of safe metals. A continued slide in equities is almost certain to do the same. If the dollar’s recovery against the Yen and Euro tapers off silver could also benefit, and watch the next set of employment figures too – while July’s were good they weren’t all they were expected to be, and that could mean the economic recovery is starting to run out of steam. If that’s the case precious metals are likely to take on their traditional role of a safe haven, pushing prices up, and anyone who buys while they’re as cheap as they are now could see a very nice return.

Overall silver had a worse week than gold did, but the picture isn’t as black as all that and there’s potential for a rise in the near future. Just watch the other indicators and be ready to offload silver if the price keeps falling, but we’re not at that point yet.