By Melissa Pistilli-Exclusive to Silver Investing News

Precious metals prices are taking heavy hits in the recent week from continued European economic woes that are helping to support the dollar.

On Wednesday, silver prices plunged threatening a breakdown once again through the $15 an ounce support level as volatility in global currency markets spilled over into the precious metal sector. Confusion over what, if any, role other EU members plan to take in Greece’s debt crisis is sending mixed signals.

The outlook for the euro in the currency markets yesterday was much more positive, depressing the dollar. It looked like silver and gold prices could recover slightly from last week’s huge losses Tuesday.

European Central Bank President Jean-Claude Trichet announced he would be leaving the central bankers meeting in Sydney early for the European Council meeting this Thursday, and the news prompted speculation that Europe’s financial leaders may be inclined to help tackle Greece’s mounting debt issues.

Currency and commodities markets were buzzing with optimism at the prospect and the euro rose against the dollar posting its best one-day gain since November, which in turn helped support gold and silver prices. Silver managed to close at $15.45 an ounce Tuesday after closing slightly below $15 Monday in New York.

However, the dollar reversed course against the euro in early Wednesday trading after Fed Chairman Ben Bernanke made a “hawkish” announcement that the Fed may begin to raise interest rates and unwind stimulus measures and the US Department of Commerce reported the trade deficit had widened to $40.2 billion.

Serious Volatility in the Markets

The markets are displaying the same back and forth that would lead any psychiatrist to a diagnosis of serious bipolar disorder.

By Wednesday afternoon, the dollar had trimmed down some of its early morning gains on reports that France and Germany are to present a plan at the European Union summit Thursday to prevent Greece from falling into financial collapse and dragging the rest of Europe with it.

The dollar’s slide helped silver and gold pick up a bit, although prices still remain on the brink of slipping more.

But what’s really going on? First, we hear Germany, Europe’s biggest economy, is willing to help Greece climb out if its financial hole. Then those rumors are quashed by European leaders who sternly insist Greece should handle its own problems. Now, reports are coming in that France and Germany may be forming a coalition to help Greece.

This seems odd as just this morning German officials were adamant that no bailout was needed and “no decision on such help” was even being discussed because EU rules prohibit guaranteeing another nations debts.

What’s going on is that Europe’s leaders are coming to terms with the sobering reality that living in a global economy means when one nation suffers, every nation suffers.

The European Union has been facing certain economic upheaval the same as its North American counterparts and Greece is “the proverbial canary in the coal mine, a sign of potentially bigger problems,” says CMC Markets analyst Colin Cieszynski.

If Greece goes down, its spells trouble for Europe’s other teetering economies like Spain, Portugal and even the UK, derailing economic recovery in the Eurozone, adds Cieszynski.

“We’ve had to face up to the fact that what is now a Greek [government deficit] problem could turn into a European one,” said a German official quoted by the Financial Times.

However, any bailouts on the part of Germany or France will face extreme populist anger from its citizens, much like we’ve already seen in the US where tea-partying protestors are up in arms over big government bailouts to the very institutions who got us into this mess in the first place.

Watch the Currency Markets

We should expect the current volatility in silver and gold prices to continue in the coming weeks as Europe’s latest financial crisis plays itself out. Expect the dollar’s movements, and hence that of gold and silver, to be directly tied to any decisions coming out Thursday and beyond.

As in the recent past, the US dollar will continue to direct movements in precious metals prices. While the dollar continues to rally on Europe’s economic woes, some analyst are predicting a dollar slide later in the year.

“The issue of sovereign risk, which is currently working in the dollar’s favor and against the euro and therefore gold, could come back to haunt the dollar,” said analyst at HSBC.