By Melissa Pistilli—Exclusive to Silver Investing News

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Silver’s spot price action this week—especially in comparison to gold, oil and equities—reveals the market is paying much more attention to its industrial side as of late.

Prices started the week off higher trading around $18.40 an ounce overnight, but slipped throughout the day to close at $18.28 an ounce in New York. Tuesday, prices spiked nearly 0.25 cents in late morning trading only to setting back down to close at $18.16 an ounce. Weak energy prices and debt troubles in the EU added downward pressure to the industrial metals market, dragging silver down as well.

Wednesday, the spot price of silver dropped as low as $17.80 before rebounding to $18.23 an ounce as gold hit its highest level since December at $1,174.18 an ounce after S&P cut its credit ratings on Spain. Although it managed to recover some of those losses later in the day, silver still closed down at $18.06 an ounce as the markets fretted over the sustainability of any global economic recovery.

But then, after starting out the morning as low as $18.03 an ounce Thursday, Silver rose as high as $18.59 an ounce as the dollar dropped, global macroeconomic sentiment improved after positive US economic reports, and word spread of productive negotiations between Greece, the IMF and the European Union.

While investors in Europe have turned to gold for safety, bringing it to record highs as priced in euros, sterling and Swiss francs, the economic woes in the euro zone are having the opposite effect on silver prices causing the two precious metals to diverge as the markets ponder the fate of the global recovery and physical demand for the metal.

Silver’s price moves, says Kitco’s Jon Nadler, “contradicted a number of crystal ball-gazers who had prognosticated a move several order of magnitude higher than gold’s –when ‘things get going.’ . . . The industrial demand and risk asset trade components of that metal appear to outweigh its fast-fading monetary attributes of yesteryear.”

There is still a lot of uncertainty in the markets concerning the interrelated issues of Europe’s debt tribulations and the pace of global economic recovery, and both will continue to impact silver’s price movements at least in the medium-term, and will likely overshadow any positive economic sentiment.

The European (and in fact, the global) financial crisis is far from over and will continue to influence the precious metals (and industrial sector) for some time to come. Whether silver will react positively or negatively over the long-run still remains to be seen.

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