Dour Europe News Weighs on Silver’s Industrial Use Side

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Dour News Out of Europe Weighs on Silver’s Industrial Use Side – North Korea’s Latest Nuclear Threats Rattle the Marketplace – Indian and Chinese Dip Buying in Precious Metals Appears – U.S. Job Report Wildly Misses Expectations and Precious Metals Rally Hard.

Dour News Out of Europe Weighs on Silver's Industrial Use SideSilver again took a significant price hit in the week that ended Friday, April 5th. The white metal gapped down to $27.93 on the spot market open Monday. It declined 2.1% to $27.33 by the spot market close Friday.

Safe haven silver demonstrated that it is still very much a prisoner of its industrial use side. It declined in a week that saw dour news from Europe weigh, North Korea continue its brinksmanship, India and China begin to dip buy in precious metals, and the much anticipated U.S. jobs report wildly disappoint markets.

Dour News Out of Europe Weighs on Silver’s Industrial Use Side

The Cyprus crisis may be resolved for the moment, but the body blows from Europe just keep on coming. On Tuesday, the Euro Zone achieved a new dismal milestone. The numbers of unemployed workers in Europe reached a new high.

The unemployment rate remained at an eye watering 12% for February. At the same time, data from the manufacturing segment worsened. The PMI for European manufacturing declined to 46.8 from 47.9. This means that manufacturing weakness has accelerated from the previous month.

You might expect this to be bullish news for the precious metals. If silver were merely a safe haven metal like gold, it might be. UBS’ London based analyst Joni Teves astutely remarked that silver as an industrial use metal requires a far greater economic recovery than what the world economy has demonstrated so far.

Silver prices will struggle to gain ground until the safe haven bid picks up more or the world economy proves the so called stronger economic growth prospects are real.

North Korea’s Latest Nuclear Threats Rattle the Marketplace

The volatile North Korean situation has become almost as constant a news byte as the European Union sovereign debt crisis. This past week, North Korea amped up their weeks old threats still further. Now they are not just vaguely waving around their nuclear weapons. To outdo themselves, they authorized nuclear strikes against American cities and targets. Their fearless leader Kim Jong Ang also restarted work at his old plutonium reactor.

The U.S. indicated it takes the man seriously. Secretary of Defense Chuck Hagel stated that North Korea is a “real and clear” danger to the U.S., its interests, and allies. To that effect, he dispatched an Israeli-styled missile defense system to protect the strategic American base at Guam in the Pacific. The stock market plunged over a hundred points at one moment in response to Hagel’s live televised comments. Silver and gold recovered off of their low points of the week on the news as well.

Indian and Chinese Dip Buying in Precious Metals Appears

Silver’s slide this past week could have been substantially worse. India and China helped to limit the losses and even turn big brother gold radically around. The two nations began buying precious metals aggressively on the dips.

While ETF holdings in gold have declined in March from 50.1 metric tons, the silver ETF holdings managed to rise 82.1 tons up to 19,952.9 tons of total holdings. Despite the price declines that silver has suffered from during the past two consecutive weeks, this is a bullish indicator for future silver prices.

U.S. Job Report Wildly Misses Expectations and Precious Metals Rally Hard

The biggest economic news item of the week revolved around the much heralded U.S. jobs report. Prior to the release of the job numbers, analysts had begun to believe that the Federal Reserve might have to dial back its money printing schemes and policies.

This idea was utterly crushed Friday when the non farm payrolls report showed a paltry 88,000 in new jobs added while some watchers had expected 200,000 new jobs. To make matters worse, the six month average in the report showed a drop from 197,000 new jobs to 188,000 jobs added. The old adage “one report does not a trend make” was shot down by this six month average deterioration.

It is true that the unemployment rate declined to 7.6%. Pay no attention to the man hiding behind the curtain. This was also the result of bad economic trends. The overall participation rate in the U.S. job market has reached new lows yet again.

This skews the unemployment rate dramatically. Donald Trump put it best over the past few months. He pointed out that the overlooked and under-reported U-5 unemployment report numbers show actual unemployment to be over 14% in the U.S. Now that is starting to sound like Greece and Spain.

The quotes on just how bad this job report is proved to be noteworthy. Investment Bank Nomura states that the jobless rate decline is for “wrong reasons” with discouraged workers out of the job search pool. Vecchio of DailyFX says the job market is “barely treading water.”

Brown Brothers Harriman’s Chandler claimed that the report is “shockingly disappointing.” He went on to say that the old pattern of prior years is back. The job market attempts to improve. Reality then sets back in with the economy actually not on the mend. Instead, it is on Federal Reserve induced life support.

The conclusion you should take away from this pitiful unemployment report is that the Fed is nowhere near ending its wild money printing spree that has caused them to more than triple the U.S. money supply. They will continue to print $85 billion in new money per month ad infinitum.

This report may have hurt the industrial use side of silver in the short run. In the medium to longer term, it shows you that safe haven demands like silver and gold will only grow in value as the federal government continues to debase the U.S. dollar until the bitter end.

Take Away on Silver Markets

An interesting development surfaced this past week. Silver prices dropped on the futures market. At the same time, the U.S. mint released data on silver sales. The year over year U.S. silver coin sales are up a staggering 32%.  They sold 3.36 million ounces strong of silver coins. This means that physical holdings of silver are on the rise in both ETF’s and actual personally held bullion and coins.

One day soon, the paper silver market speculators who dominate the prices in the short run will see that the jig is up. When that day comes, heaven help the people who are holding short positions of silver and gold.

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