Silver Market Update (9-29-2014)

Gold investors have seen some long-overdue reassurance in the market this week, but that hint of optimism hasn’t spread to silver. On the bright side things weren’t anywhere near as bad as the week before, but the spot price still fell steadily to finish 13 cents down at $17.66. That’s right on the brink of a four-year low and there’s no sign of an upturn yet. This is unusual, because both US and UK stock markets have been losers this week and that usually benefits silver.

It certainly looks like gold has benefited from the check in the equities markets, giving it a chance to take back its traditional role as a hedge against falling stocks, and the surge in demand has been enough to arrest its downward spiral at least for now. It’s slightly surprising that silver hasn’t piggy backed on that trend – usually it’s coupled quite firmly to gold at times like this, so we would have expected the price to stabilize or even show a modest recovery. That hasn’t happened though. It’s going to be worth keeping an eye on the Dow and FTSE 100 over the next week or so, because there’s still a good chance that continued weakness in stocks could translate into an upturn in silver.

On the other hand it’s possible the spot price still has further to slide. Some market specialists are wondering if the recent steady fall has damaged confidence enough that declining silver prices have now become a self-fulfilling prophecy. If that’s the case it’s hard to say where support will start to rebuild itself but there’s no guarantee it will be this side of $16. Even $15 isn’t completely out of the question, although there’s no reason for it to fall that low – sometimes these things just develop a momentum of their own, and that could be what’s happening here.

Other factors that could be keeping the price down include the US dollar’s ongoing good performance, with the currency staying high against Sterling and making more gains over the Euro. Gold seems to retain enough confidence to bring in investors even with a strong dollar, but silver is looking less healthy by comparison. Even so, prices can only get more tempting and at some point, barring a complete loss of faith, it more or less has to start attracting investors again.

If you currently have silver, should you sell before prices fall even more? It’s certainly an option, but if you’ve bought in the last four years you’re going to lose money on the deal. How much you lose won’t be massively affected by hanging on just a little longer. On the other hand a strong rally could see you do very well indeed, so unless you have a lot of silver you’ve been holding since prices were below the $15 mark it’s best to keep it for now. In fact those who take a longer-term view could do well to pick up even more, because it really is looking like a bargain.