While gold has gotten some gains due to geopolitical unrest and news from the Fed, the same cannot be said for silver. With a weak showing over the last few months, many people are concerned that this could be a sign that gold’s market strength will not last either.
December gold futures on the Mercantile Exchange were up 1.25% while September silver fell by 2.1%. This is an unusual occurrence since the two commodities usually trade couples with gold. Gold received a slight boost over the last week, but this strength was not lent to silver.
Silver has been consistently falling since the middle of July, even going to a seven-week low of $19.74 for the cash silver, and $19.76 for future trades. Jonathan Butler, a metals strategist for Mitsubishi, has said that silver has been “worn down” by the increasing strength of the dollar, and does not gain the benefits of geopolitical unrest. However, the geopolitical tensions that have struck around the world have prevented the market from encroaching on the prices of silver.
The daily tech charts have shown that the expected December silver prices are sitting on the 100-day moving average. This puts futures prices at $20.016, but with silver already going beneath that level, it increases the risk that is put upon the market from the standpoint of the technical charts.
The mint sales for silver coins have dipped down 27% through the month of July, and they demand for physical silver can only be described as sluggish at best. The European markets are not doing much better, as silver coin sales have fallen there as well. Even the exchange-traded funds holdings have experienced a drop-off.
The projections for the rest of the 2014 year are also showing a downward trend, according to TD Securities trade specialist, Bart Melek. He says that the silver bar and coin demand will drop 25% through 2014 and up to 15% through 2015. ETT holdings are also expected to drop as there is a high supply of silver and the US approach to monetary policy is likely to change.
Peter Thomas of Zaner Precious Metals also believed this to be true. He says that due to vacations and hedging for coin dealers drives business down and leaves the silver market vulnerable for at least three weeks of the month. However, he has also noticed some changes occurring in the Comex market. With the Commitment of Traders report that was recently released, it was revealed that non-commercial futures fell by as much as 42 million ounces, which is about 14% of the market. This has been one of the greatest losses incurred in the market since February 2013.
Some have said that with gold sitting at its current rate, there is a selling opportunity in the precious metals market. The price is only being held in place by safe-haven buying and hedging for precious metals. It is predicted that with the coming tightening of monetary policy, silver prices could potentially fall as low as $17.50 an ounce. With an increasing weakness in key markets of the silver trade, many people are considering the correction that was made last Tuesday to be a possibility for the future of silver.