Silver Falls But Investment Opportunities Remain

June 03, 2014

The silver price has dropped to 11-month low ahead of ECB monetary policy announcement later this week, presenting investors with several trading opportunities. The drop also comes two weeks after it was announced that the London silver fix would cease in August this year.

HAI.com reported that silver is at an 11-month low while it waits for the European Central Bank’s monetary policy announcement later this week on Thursday and the U.S. job report on Friday. The grey metal is now at $18.81 an ounce.

Silver also saw its price drop off last week after the U.S. posted stronger than expected PMI numbers. Gold and silver are most often classed as precious metals, which are historically known to perform well during times of market stress and are often referred to as safe haven assets.

However, current economic growth paints a bearish picture for silver and as such has seen the metal’s price drop.

Viktor Nossek, head of research at Boost ETP, said: “Precious metals have lost their lustre and the view long term works against them now because of the ongoing recovery in the U.S. economy and Europe.

“There are, however, opportunistic trades to be made from silver. In the short and leveraged space we are seeing that investors are bullish on silver because of the volatility.  Silver is a good way to be opportunitiscally positioned,” Nossek said.

A note from ETF Securities also reported that the silver price has more than halved from its high in 2011 due to industrial demand turning up, supply falling, inventories declining, a stable gold price and volatility at a near decade low.

However, ETF Securities argue that these market conditions are ripe a silver recovery.

Supporting this theory are Chinese silver imports, which have increased 17 percent year on year, silver fabrication demand which has increased 6  percent since 2000, and speculative shorts in the futures market are elevated, indicating scope for a short recovering rally.

Investors could access silver via silver-backed exchange traded products. Currently 70 percent of silver inventories are in ETPs, according to date from ETF Securities.

It said in a note: “At the end of 2013, silver ETP holdings accounted for about 70 percent of estimated readily available silver bullion inventories, compared to a fractional amount in the year 2000….. Governments have sold off most of their silver reserves and much of the silver has been used for industrial purposes, unlikely to ever re-enter the marketplace.”

 

 

 

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