A strong US dollar did not hamper silver prices on the day. Silver and gold prices are benefiting from the political tensions with Iran that are driving up the price of oil. Silver and gold are once again acting as a risk asset as sustained high oil prices increase the likelihood of a recession.
Prices for commodities such as crude oil and copper have been hit by fears that demand may suffer due to the ongoing European debt crisis and signs of economic slowdown in Asia; with the majority of demand for silver coming from the industrial sector it’s hard for the white metal not to get caught up in concerns of slowing global economic growth.
Despite the risk inherent in a volatile market such as silver, many investors still find the white metal an attractive investment as it has the potential to bring far greater return on investment. The ROI for silver can surpass gold exponentially, as price movements over the last year have shown.
The current economic climate in the western hemisphere is reminiscent of the 2008 Crash and the understandable fear that we’re heading into the Great Recession 2.0 has investors seeking safe haven assets. What will happen to silver prices if the current economic crisis spirals into a repeat of 2008?
The price of silver fell on Wednesday after making modest gains early in the trading week. After last week’s tremendous downfall, the downward pressure on price is being attributed to the improving US dollar, fall of oil prices, as well as momentum plays by speculative investors. Yet not all have soured on the white metal.
“I think silver is going to be the big investment of this decade,” said Eric Sprott of Sprott Asset Management Inc., speaking at the Vancouver Resource Investment Conference.
Alongside gold’s recent record highs, the demand for precious metals as an asset class has helped propel the price of silver to 30-year highs. Many analysts are concerned the price is trading off momentum and not off fundamentals. However, a major firm has raised their price target even higher.
Some analysts actually expected silver prices to remain bullish this week in anticipation of a weaker dollar. But the greenback flipped the script on the white metal, pushing prices down as low as $17.80 late Wednesday morning. Along with silver prices, one silver miner was breaking investors' hearts as well: Coeur d'Alene Mines.
Silver is feeling the pressure from both the precious metals sector, with gold dropping to its lowest close in three months, and the industrial sector as investors worry that the economic recovery is stalling.
Long-time silver investors are well aware that this isn’t the best time of year for precious metals as gold and silver prices trade sideways to lower, hitting bottoms by mid-August. Despite the depressing name, the summer doldrums do offer a ray of sunshine.
Friday, January 6, 2012