Chinese New Year Holiday Leaves Silver and Gold Without Support, Moody’s Lowers Growth Forecast for G8 Dimming Silver Industrial Prospects, Silver Breaks 200 Day Moving Average and Sinks Further, Weak Data from the European Union Encourages Sell Off in Precious Metals, Central Banks Purchase Most Gold in Fifty Years.
After a month of consistent consolidation and weekly price gains, silver finally became a hostage to gold’s steep price declines and a spattering of negative economic headlines in the week that ended Friday, February 15th.
Silver gapped down from the previous week’s spot market close of $31.42 to open the week of 2/11 at $30.95. From there on, it was mostly a case of how far silver would decline, as gold began to plummet and continued to fall until almost the end of the week.
Silver finished the week just below the psychologically important round number of $30 at $29.78 spot market close Friday, as the Chinese New Year week left the precious metals markets without critical buying support, as Moody’s cut growth forecasts for the G-8 nations, as silver broke its 200 day moving average, and as weaker than expected data from the EU hurt the industrial demand side of silver.
Chinese New Year Holiday Leaves Silver and Gold Without Support
China, Hong Kong, Singapore, and other key Asian precious metals support markets were closed for the Chinese New Year all week of 2/11. This left gold and silver without their traditional allies who buy the metals on most every dip. When gold started to sell off and reached a five week low on Monday, the usual Asian hours session buying did not materialize.
All week long, silver and gold suffered as their typical supporters were absent on the breaks. There is reason to believe that with China and the other major Asian precious metals buyers back in the saddle this week, gold and silver will recover at least somewhat as their champions return to the marketplace.
Moody’s Lowers Growth Forecast for G8 Dimming Silver Industrial Prospects
Silver has the industrial metals demand side to it besides its safe haven bid. This week, the industrial demand picture took a hit courtesy of Moody’s ratings agency. Moody’s came out Tuesday and reduced its economic growth forecast for the eight great economies of the world: the U.S., Britain, Japan, Germany, France, Italy, Canada, and China.
They project that the G-8 economies together will grow at 1.4% for 2013, down .2% from their previous estimate in November. A slower major economies’ growth rate would impact industrial demand for silver considerably, if it proves to be true. Silver was already a hostage to gold this week and found the news to be more than it could shake off.
Silver Breaks 200 Day Moving Average and Sinks Further
A key technical level came into play to cause silver to sink further this past week. The white metal’s 200 day moving average major support had rested at $30.75 as of Tuesday. Once silver took this line in the sand out, the round figure at $30 came into the silver bears’ gun sights. For now at least, bears have re-gained control of the technical picture for silver prices.
Weak Data from the European Union Encourages Sell Off in Precious Metals
Silver’s industrial demand picture suffered from still more negative news this week out of Europe. The EU supplied disappointing GDP data on Thursday. Fourth quarter GDP dropped .6% as measured against the third quarter. For 2012, the GDP declined by .5%. This was worse than expected for the block as a whole.
Even stalwart export and growth leader Germany watched its own heavyweight GDP drop by .6% against the third quarter. Reluctantly, the ECB then lowered its growth forecast for 2013 from 0% to minus .3%. Silver prices continued their steed descent for the week and broke convincingly below the $30 mark as the Euro currency declined and the dollar rose on the news.
Central Banks Purchase Most Gold in Fifty Years
One bright spot for gold that helped to stem the decline in the two precious metals by the end of the week came from the World Gold Council on Thursday. They announced that global central banks purchased 534.6 tons of gold in 2012. This represented twelve percent of all gold demand for the year, versus their ten percent purchase share of 2011.
Central banks have not bought this much gold since 1964, and it offers hope for continued strong official sector support for gold and silver as the central banks diversify away from the dollar going forward.
Take Away On Silver Market Prices
Silver took a sound beating this week as it dropped 3.8% during the week, but fell a more steep 5.2% versus the spot market close of Friday, 2/8. For now, the critical line for silver is to hold above the January lows of $29.24.
Even though there was some negative economic growth news this week, silver and gold can still count on central bank support and Asian markets to bolster the metals as they buy on the dips.