The current silver market development can be attributed to violent price actions. The last session ended with spot silver settling at $23.28 per ounce. The metal lost only 3 cents. On Wednesday, the commodity also lost 3 cent. But a week ago, silver was over $27 an ounce. The silver market was slaughtered to its current threshold just in 3 days.
The silver sell-off started last Friday in direct correlation with the gold price crash. The steep decline of above $200 an ounce in gold is attributed to a number of gold price forecast downgrades by big investment banks and ETF outflows. Analysts believe that the primary aim of this actions was the gold market. The silver slump was just collateral damage consequence.
A scenario suggests that violent gold market action came after the possible gold reserves sale of Cyprus. That caused worries among market players. Investors and traders thought that if other European nations may follow the pattern of selling gold. Therefore, investors were first to bail out.
Yet, this scenario is not widely accepted, but at least provides some explanation. Still the actual sell-offs driver is arguable.
Silver fell by $1.81 last Friday to close the week session at $25.85 per ounce. The selling frenzy continued on Monday driven by investors’ panic. Liquidation was even far more aggressive. At the beginning of this week the white metal lost $3.16 to bottom at $22.69 per ounce and even lower in electronic trading. In two days term, silver lost over 17%. Even as the white metal is well known to be very volatile, such steep decline in a matter of two days is rare and unusual.
Currently gold is struggling to break back above the $1,400 level, although it holds above $1.380 during the past two days. Silver is steady above $23. Though, the white metal meets resistance at the $24 threshold. The major technical harm has been done. Hence a quick recovery is not very likely. However, silver at the present price is a good buying opportunity for long investors.
Recently BMO trimmed its silver price outlook until 2015. The financial service company lowered its 2013 projection by 9% to $30 per ounce. 2014 silver is expected to sit at $32, yet the firm still sees a 20% downgrade. The white metal is forecasted to reach $30 again in 2015. BMO believes that silver industrial qualities would be surpassed by precious metal attributes.
The bear developments in the metals markets are also caused by deflationary worries. Both the US and China recently posted disappointing economic data. In addition, the IMF downgraded its global economic growth outlook for 2013.
Therefore, silver price growth will likely be limited even if industrial demand does improve. That is in respect of silver oversupply expectations as major silver producers plan increased production in 2013.
However, even with the increased supply, consumption of silver as industrial metal and in the jewelry industry will very much likely increase. At the current price, the white metal is a very attractive investment for jewelry makers and retailers from around the world. On the other hand, silver is not a subject of central banks buying as gold, therefore a change of governments’ monetary policies should not have such damaging effect on the metal’s price in the long term as eventually on gold.
