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The dollar firmed up today on consumer confidence reports that show a modest improvement. However, jobs, housing and income expectations fall, painting an unflattering picture for the U.S. economy. Silver was more than likely helped by speculations that the Feds will try to create inflation with another round of large asset purchases.
By Michael Montgomery—Exclusive to Silver Investing News
“Consumer confidence, while slightly improved from September levels, is still hovering at historically low levels. Consumers’ assessment of the current state of the economy is relatively unchanged, primarily because labor market conditions have yet to significantly improve,” stated Lynn Franco, Director of The Conference Board Consumer Research Center.
The slightly better news in consumer confidence was flanked with less than promising data in another. Jobs and income expectations in the report were the lowest in a year, as consumers are still worried that jobs are not being created at a fast enough. Also, data on home prices remain abysmal, which rained on the news of improving consumer confidence. The report, which helped the dollar firm up recent losses, in no way paints a pretty picture for the U.S. economy. This may explain why silver gained on the back of gains by the greenback.
Also, recent statements by Fed Chairman Ben Bernanke have hinted to future actions. The fed may launch another large asset purchase to help the economy out of the ongoing financial crisis. “This time, with interest rates already near zero, the Fed will be aiming to increase the rate of inflation and reduce the cost of borrowing in real terms,” reported Craig Torres, for Bloomberg. The goal is to jump start consumer spending to lower unemployment rates, especially with the holiday season right around the corner.
A recent ‘factbox’ report from Jan Harvey, for Reuters details the price forecasts for silver and gold from the world’s largest banks and investment firms. HSBC has forecasted the price of silver in 2010 to $19.00 an ounce from $17.50, its 2011 silver forecast to $20.00 an ounce from $15.50 and its 2012 to forecast $17.50 from $15.25.
BOA/Merrill Lynch sees the 2011 silver price at $20.25 an ounce, and $21.00 per ounce for 2012. Goldman Sachs is slightly more bullish than the previous two with more short term forecasts of $21.00 an ounce on a three-month period, $21.70 an ounce on a six-month period, and at $22.80 an ounce on a 12-month period.
The overall tone of the major banks is that while gold is to remain at elevated levels due to economic uncertainty and silver is to stay at or near the current 30 year highs, analysts warn that the volatility of the silver market may see drops to the overall price over the next few years.
Silver Market News
New statements have been made about ongoing investigation by the Commodity Futures Trading Commission over price manipulations in the silver market. “There have been fraudulent efforts to persuade and deviously control that price,” stated Commissioner Bart Chilton. The investigation into the silver futures market began in 2008 as a result of numerous reports to the CFTC over a 20-25 year period claiming that prices were manipulated downward.
As a reaction the CFTC has proposed new regulations in concern to manipulation and disruptive trading practices. One of the main practices is Spoofing, where “traders make bids or offers but cancel them before execution, and “banging the close” — acquiring a substantial position leading up to the close of trade, then offsetting the position in the final moments to manipulate the closing price,” as reported by Leslie Adler, for Reuters.
Some have questioned whether practices such as this contributed to the May 6th stock market flash crash. Other analysts state that further regulations and prosecutions of those deemed as price manipulators will only create volatility and higher prices.
