Silver Down on Mixed Economic Cues

By Michael Montgomery—Exclusive to Silver Investing News

As a result of silver’s unique demand as both an industrial and investment metal, its prices experience their share of volatility. Lately, both these demands have suffered, and have thus weighed on the price of the white metal. With China’s economy showing the signs of a slow down, the industrial demand for silver has also slowed. Meanwhile, the strengthening US dollar has drawn from silver’s safe haven appeal, while continued Eurozone debt issues have also added a fair share of uncertainty to the silver markets.

On Thursday, silver traded down $0.65, to $30.58 per ounce, a loss of 2.08 percent. This decrease almost doubled the losses for gold which came off 1.37 percent.

China’s economy slows

While the Chinese economy grew at 9.1 percent in Q3, the figure marks the slowest growth since 2009. This is significant for the silver market as approximately 70 percent of the country’s demand for silver comes from the industrial sector. Customs data recently showed export growth falling more than expected, with imports also slowing.

“China’s trade surplus narrowed in September as exports to the European Union fell, showing that faltering economies abroad are beginning to affect China,” reported Aaron Back, for The Wall Street Journal.

Inflation rates have slowed to 6.1 percent, down only slightly from August’s inflation rate of 6.2 percent. However, many analysts have stated that it is unlikely for the PBOC to make any drastic changes to policy until further data emerges. These factors have raised concerns that the industrial consumption for silver, which accounts for over 45 percent of total demand, may drop.

“The fundamentals still look very weak,” said Suki Cooper, a commodities analyst at Barclays Capital in New York who expects silver to average $27 in the fourth quarter of next year. “The downside still looks much more vulnerable, given that we’re not seeing the same strength in industrial demand that we have seen previously, and given that mine supply still looks very healthy.”

Euro debt concerns and positive US economic data      

As concerns of a looming Greek default with few solutions and threats of a downgrade to the French credit rating, the persistent uncertainty in European economies is being felt throughout the markets.

“The uncertainty surrounding the latest efforts by European officials to solve the EU debt and financial crisis have limited buying interest in the precious metals this week. A firmer US dollar index as the trading session progressed Thursday also worked to pressure the precious metals markets,” stated Jim Wyckoff, for Kitco.

Positive US economic data may have put a damper on precious metals. US jobless claims decreased modestly, and housing starts increased to a seasonally adjusted annual rate of 658,000 a 15 percent gain.

Going forward analysts are mixed on price forecasting. On the low end, Barclays analyst Suki Cooper put support levels at $22.45 to $24.55 per ounce while averaging $27 this quarter. For resistance levels Kitco analyst Jim Wyckoff stated, “Silver bulls’ next upside price objective is producing a close above strong technical resistance at $33.585 an ounce.”