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By Melissa Pistilli-Exclusive to Silver Investing News

With all the economic uncertainty and the constant up/down movement in the markets, some confusion in the precious metals market is expected. Today’s silver price actions were no exception.

Despite the same-day drop in equities, precious metals prices experienced heavy losses Monday with silver falling to about $12.10 an ounce. Not surprising, according to MF Global Canada commodities future strategist, Aaron Fennell. He attributes the sell-off in equities to a normal consolidation after a four-week rally, rather than a sign of  increased risk inversion; hence, the lack of money running into precious metals.

After the G-20 Summit, global equity indexes rallied late in the week as investors made easy gains by selling precious metals and entering riskier equity markets. G-20 leaders have announced agreement to tighter regulations for hedge funds and risks taken by banks, and have promised over $1 trillion in aid.

There is a growing sentiment in the markets that the worst of the recession may have past and that initiatives by world leaders are soon to push the global economy toward recovery. “Risk appetite has increased further following the actions of various governments and central banks as well as the combined efforts of the G-20 nations last week,” said James Moore, a TheBullionDesk.com analyst.

Differing Predictions from Fundamental Analysis

A look at silver price forecasts from different analysts today shows a mix of bearish and bullish sentiment.

Standard Chartered Bank sees the possibility of further declines based on “mostly bearish” daily momentum indicators like the 14-day relative strength index and the stochastic oscillator. David Barclay, the banks commodity strategist, points to silver’s 50-week momentum indicator, which is moving lower, and eroded support levels as signals of further declines in the silver price.

“The topping pattern that formed between March and August 2008 is expected to cap over the medium and long-term horizon,” said Barclay. “This combination should leave the $10.80 support to come under pressure over the coming months, and a move to retest the $8.4587 low from October 2008 is expected in time.”

CrownForex analysts had a more bullish interpretation of silver’s price movements. As long as support at $12/oz remains unbroken, CrownForex still expects the general trend to be to the upside with targets at $16.50/oz.

Commerzbank commodities strategist Eugen Weinberg sees strong fundamentals for silver especially on the supply side of the equation. “After a weaker second quarter we expect silver prices to rise to $16 an ounce, from current levels of around $12. We also see more scope for the price to rise than to fall,” he said.

Positive Sentiment in Equities Flimsy?

Gold and Silver Investments’ Mark O’Byrne believes the positive reaction in the equity markets to the G-20 Summit is little more than “irrational exuberance,” which has put overdone pressure on the precious metals market. Agreements reached at the meeting have not won over O’Byrne, who accused leaders of being “long on rhetoric and lofty principles and short on concrete commitments and action.”

Some of the most pressing global economic issues were not addressed such as China, Russia and others’ concerns over the “international monetary system’s unhealthy reliance on the US dollar as global reserve currency.”

The US dollar index rose nearly 1 per cent on Monday, lending further downward pressure to precious metals prices. A weak dollar is what silver and gold prices will need to substantially recover, according to some analysts. And that may not be too far off. “It is just a question of when the U.S. dollar falls,” said Fennel. “I think at some point economic fundamentals will come back into play and in that environment the U.S. dollar does not look very strong.”

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