Silver Takes Largest Fall in 3 Months on World Economy Prospects

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Silver Takes Largest Fall in 3 Months on World Economy Prospects and China, Large Silver Short Seller Damages Silver Prices, Citibank Says Stronger Dollar Weighing on Silver and Gold, Indian Investors Hold Key to Short Term Silver Prices.

Silver Takes Largest Fall in 3 Months on World Economy ProspectsSilver took a tumble of over 4% this past week that ended October 19th in what proved to be a significant setback week for the white metal. After ten weeks in an uptrend that saw prices reach the $35 plus dollar per ounce range, silver has clearly hit a brick wall for at least the short term.

It was not any bull market exhaustion that took the metal down substantially this week. While resistance in the $35’s has proven formidable in prior weeks, there were some fundamental reasons for silver to weaken this mid October.

China and the global economy, mystery silver short sellers, a stronger U.S. dollar, and uncertainty in the Indian physical silver market all conspired against the white metal this week that saw silver spot prices drop from last week’s close of $33.45 down to $32.06 by the spot market close of 10/19.

Silver Takes Largest Fall in 3 Months on World Economy Prospects and China

The week of October 19th proffered more signs of a weakening global economy that rattled the silver market that sees much demand as an industrial application metal. Stanley Fischer, the Central Bank Governor of the Bank of Israel, went on record with his statement that the globe is “awfully close” to another recession. This comes just weeks after the IMF has offered a similar assessment and warning for global growth prospects.

Investors have been hoping that China will ride to the rescue on a white horse of additional stimulus to shore up its own flagging economic growth. This week, that hope took a body blow. Deputy Governor Yi Gang of the Bank of China reiterated that the principal goal of the central bank is to achieve price stability, not to stimulate growth. He touted the risks of a bubble market forming in housing as reasons that unlimited stimulus is not in the cards in China. On the back of these central bank governor announcements alone, silver dropped 2.8% in a single day.

Large Silver Short Seller Damages Silver Prices

Silver also suffered from a sudden imbalance in the critical supply and demand relationship for the metal. It came out this past week that during the Columbus day holiday weekend, a major not for profit silver holder entered the market and sold heavily into thin market liquidity.

The price drop was further exacerbated as protective stop losses were hit, which caused more automatic selling to execute in low volume markets. In the past, such hit and run sell actions have sparked cries of silver market manipulation, but so far, official regulatory investigations into these allegations have been unable to stop the guilty parties from their time to time unscrupulous indulgences.

Citibank Says Stronger Dollar Weighing on Silver and Gold

Meanwhile, late in the week, the dollar also strengthened against the Euro. Typically, silver and gold rise or fall with the Euro. This is because the two precious metals are measured first in dollar terms, so that they tend to move inversely to the greenback. A stronger dollar generally means weaker silver prices, and this week proved no exception to the rule.

Indian Investors Hold Key to Short Term Silver Prices

Much of silver’s hope for a rebound in the near term centers on the value of the Indian Rupee currency. India is among the largest silver buyers in the world. Their currency has risen over seven percent against the dollar since August. This makes silver dramatically more affordable in their local currency.

The last quarter of the year is also typically the time of highest physical demand for silver in India because of their festival and wedding seasons. This hope for physical demand is the main element that holds silver prices up where they are now. It could prove the key catalyst for a turnaround back to bullish advances in the weeks and months ahead.

Take Away On Silver Market Prices

Silver and gold have both taken some hits in the last two weeks. This week that ended October 19th was a more severe period for silver, which had not seen such steep daily drops since July. The white metal suffers from declines in estimates for global growth. A more robust U.S. dollar is also not helping its price movement action lately.

Anytime you hear rumors of silver market manipulation, or heavy sales that are offered in hit and run thin liquidity conditions, you can expect this to be bearish for the precious metal too. Silver may be down for the count this last week, but it is certainly not out so long as the hope for the reemergence of strong physical demand, especially from key silver market player India, looms in the near future.

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