Directionless Silver Pushed Around by Fed News, Concerns

Directionless Silver Pushed Around by Fed News, Concerns

This week, silver was unable to sustain last week’s gains, sinking below $20 and only passing that mark on two brief occasions.

Silver started out below $19.80 per ounce on Monday, but quickly rose to $20.12. However, concerns prior to a two-day Federal Reserve meeting set to begin the next day soon drove it back down and the metal closed the day at $19.92.

Tuesday, silver continued to fall, dropping as far as $19.57 early in the morning. Though it was able to rise to $19.97 later in the day, by Wednesday it had fallen even lower, to $19.49, on the release of US second-quarter GDP and June private payroll numbers, according to Scotiabank’s Gold & Silver Marketwatch. Later that day, the white metal made its second rise above $20, hitting $20.04 as market participants took in the news that the Fed will continue quantitative easing.

Silver closed Thursday at $19.63 after hitting a high of $19.90 earlier in the day.

If Barclays is to be believed, investors may still have more up-and-down movement to weather. The investment bank said Monday that the white metal may decline another 12 percent to hit its lowest price in three years. It believes silver may be set to form a “a triangular pattern called a bearish pennant,” according to Bloomberg.

Dhiren Sarin, the firm’s chief technical strategist for Asia Pacific, noted, “[w]e are moderately bearish at the moment though we are watching these levels.”

Gold-silver ratio to rise

The gold-silver ratio — the amount of silver ounces needed to buy an ounce of gold — rose to a three-year high of 66.6 on July 19 and is set to reach 70 by the end of the year as a result of excess silver supply, Bloomberg reported.

Explaining the situation, Dominic Schnider, head of commodities research at UBS’ Singapore-based wealth management unit, told the publication, “[t]he silver market is in fabrication surplus, and the only thing that’s keeping it alive is investment demand and there is no meaningful increase in ETFs. In an environment where gold falls, silver simply just does more, it’s more volatile.”