Silver Market Update Second Half of July 2012

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Investment Bank BNP Paribas Raises Estimates for Silver Prices in 2012 and 2013Silver started the last full week of July at $27.06 and finished up more than 2.5%. Needless to say, the white metal turned in a strong week’s performance after it had declined every other week for the month of July.

This impressive performance happened despite the fact that a salvage company brought up a World War II era major silver bullion discovery from below the sea off of a sunken merchant cargo ship the SS Gairsoppa. Even though there are now 48 tons of rediscovered silver (out of what will likely be 240 tons total additional supply coming onto the world silver markets) as of last week, the metal still managed to vault substantially higher.

As usual, you can blame geopolitical and macro economic events for this performance despite the new supply and demand dynamic of this largest and heaviest silver find and recovery ever.

Investment Bank BNP Paribas Raises Estimates for Silver Prices in 2012 and 2013

In what has to be one of the most telling supports for silver this week, French investment banking giant BNP Paribas came out and raised its estimates for silver prices for the rest of the year. This year, they look to see an average price of $33.50 per ounce of silver.

Given the fact that silver prices have hovered in the sub $30 price range almost half of the last seven months so far, for BNP to see their target reached, this requires silver prices to rise back to over $33.50 and stay there for the rest of the year. BNP did not stop with this support for the white metal. They have lifted their 2013 average target to $41.70.

To what do the French investment bankers attribute this imminent meteoric rise in silver prices of over twenty percent? It all centers on anticipated additional monetary stimulus. And as usual, the first culprit in this game of printing more money is Big Ben Bernake, President of the US Federal Reserve.

Markets Now Price Fed Stimulus Anticipation into Silver’s July Rise

BNP Paribas, along with many other analysts out there, believe you will soon see a third round of quantitative easing, or money printing, from the Federal Reserve. With economic data continuing to weaken stateside, while this is an election year, it is just too much pressure for the Fed not to act.

Since the Fed has yet to let down a sitting American President in an election year, they are not likely to start now. When the Fed prints more money, it drives up the prices of precious metals like silver. Even the anticipation of new money stimulus from the Fed has driven up silver prices these past weeks.

European Central Bank and EuroZone Leaders’ Comments Have Helped Pushed July Silver Prices Higher

The President of the European Central Bank, Mario Draghi, has also supported silver prices this past week when he made the comments that he was absolutely and fully committed to the Euro currency. This caused the Euro to rebound several whole pennies against the dollar. Both silver and gold prices tend to follow the Euro’s direction, as it moves inversely to the dollar.

In the days that followed Draghi’s comments, both leaders of heavyweight EuroZone members Germany and France came out in support of the Euro as well. While German Chancellor Angela Merkel pledged she would do everything in her power to protect the Euro, French President Francois Hollande went a step further and suggested that the ECB will even print money to buy the bonds of struggling nations within the Eurozone such as Spain and Italy.

A French newspaper leaked the story that the ECB is imminent to do this to support the two nations’ fragile debt markets. Those money printing hints that you heard this critically important European block and central bank institution drop again helped to push silver prices higher too. At this point it does not matter that European Central Bank and Eurozone money printing is still unconfirmed and not yet backed up by concrete actions.

The sovereign debt crisis in Europe is severe enough and the Euro in sufficient trouble that market participants believe they will act, and this market hope is enough to support silver prices. This week the ECB will meet and have an opportunity to make an announcement that will support silver prices even more if they state that they will indeed buy bonds (and print money).

Take Away On Silver Market Prices

These past few weeks, macro economic events took precedence over supply and demand fundamentals for silver prices. When the major investment banks like BNP Paribas call for higher silver prices in the near future, you would be a fool not to take notice.

Silver prices reacted quickly, as they had all week in the light of increased likelihood of more stimuli, aka money printing from both the Federal Reserve and the European Central Bank. In the next few weeks, we will see if the rumors about monetary stimulus come to fruition to continue to support silver prices.

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