GDP Disappoints and Supports Silver, Federal Reserve Reaffirms Commitment to Quantitative Easing 3, Israeli Air Force Strike in Syria Adds to Safe Haven Appeal of Silver, Unemployment Rate Rises and Boosts Silver, BNP Paribas Lowers Silver Price Forecast But Still Calls for Higher Silver Prices.
Silver posted a better performance during the week that ended Friday, February 1st. The white metal opened in spot markets at $30.96 per ounce, rallied throughout the week to reach as high as $32.15, then closed at a strong $31.82 price.
This represented an over two and a half percent rise for the week. Silver found support to run as the GDP disappointed, as the Federal Reserve affirmed its commitment to QE3, as Israel attacked targets inside Syria, as the unemployment rate rose, and as an investment bank called for higher silver prices.
GDP Disappoints and Supports Silver
Economists had been expecting a one percent gain in the US GDP for the fourth quarter this past week. When the government released the report, analysts faced a surprising .1% decline in economic activity.
Speculation immediately increased that the Federal Reserve would have to continue its quantitative easing for a longer period after the weak economic numbers appeared. This pushed silver prices up early on in the week on the idea that the Fed would continue to print money for months and years to come.
Federal Reserve Reaffirms Commitment to Quantitative Easing 3
By Wednesday when the Federal Reserve ended its two day meeting, it became clearer still that they would not be able to abandon the Quantitative Easing 3 program any time soon. Bernake and company indicated in their statement that the growth continues to be weak and that they will keep purchasing $85 billion in bonds until the unemployment rate reaches 6.5% or lower.
The only factor that might change his mind earlier would be if inflation rises above his 2% target. As it so happened, the labor department would release its updated unemployment numbers later in the week.
Israeli Air Force Strike in Syria Adds to Safe Haven Appeal of Silver
While the markets waited for the government to share its unemployment numbers at the end of the week, a geopolitical even in the Middle East increased the safe haven demand for silver and gold. Reports surfaced Wednesday that jets from the Israeli Air Force attacked and destroyed a weapons convoy of trucks that was making its way from civil war torn Syria to Lebanon.
Within hours, both Syria and Iran had promised that they would retaliate against Israel at some point for the aerial assault within Syria’s territory. Silver and gold gained on the news and potential flare up of the already troubling conflict in Syria and the Middle East.
Unemployment Rate Rises and Boosts Silver
By Friday, the unemployment report came out, and once again it surprised market watchers and economists. They had expected the rate to drop slightly from the 7.8% unemployment of the prior month down to a marginally better 7.7% rate. Instead, the rate moved slightly higher to 7.9%. Once again, the safe haven demand for silver appeared.
Not only was economic growth no longer a foregone conclusion as the GDP had already shown, but now the labor markets were not improving, but were still weakening. The dollar declined still further against the Euro on the news, which was also bullish for silver and gold prices.
BNP Paribas Lowers Silver Price Forecast But Still Calls for Higher Silver Prices
The price predictions for silver this week were mixed, but still called for higher prices. BNP Paribas lowered its silver price forecast for the year based on recent price action, but still kept it at $34.10, more than seven percent higher than it closed spot markets last Friday.
Precious metals strategist Anne-Laure Tremblay at BNP also added that silver prices have greater odds to rally for the near term than gold does. Once again, silver is predicted to lead the way where gold has faltered in trading recently.
Take Away On Silver Market Prices
Silver notched a strong week following the equally disappointing one the week before. While the white metal remains under its recent $32.50 resistance top, it did approach it and manage to close fairly near it at $31.82.
The fundamental news continues to support safe haven demand for silver, which helped it to rise over two and a half percent for the week. With the so called economic recovery in question, the precious metals likely have more room to run up in the near to medium term.