Economic Factors Affecting the Silver Futures Trading Market

In Metal Futures by Leslie Burton at 7:51 am on May 28, 2011 - [edit]

Silver Futures Trading | Are Economic Factors affecting the markets?
Silver had suffered massive liquidation that was perhaps overdone! $49.845 was our high of April 25th and now less than a month later, we may have potentially bottomed at $32.30 (silver futures prices as of 5/27/11 have bounced back up over 37)! While the Silver had seemed to lead the action in the marketplace earlier, it appears the Gold may be leading now. Part of the problem was the volatility in the Silver drove the exchanges to raise the Silver Margins so high. The Silver Market needs to consolidate and flatten to bring down the margins a bit before it can really take off again. The Silver Market does move frequently with the industrial metals as the growth of the economy goes hand in hand with the price action of the Silver Market. There are times also when the Silver takes on safe-haven properties.

Economic factors that may affect the Silver Market:

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GDP figures – Our expectations for US economic growth come in about 3 – 3.5 %. The earthquake in Japan is still a factor slowing our growth as auto parts and manufacturing may be delayed as Japan rebuilds its country after the devastation. Initial Jobless Claims - Initial Jobless Claims fell 29,000 to 409,000 last week. You can view the economic calendar of events to see when these numbers come out. The US Dollar Index – Often pressures the tangible markets when it strengthens. We look for a weaker US Dollar to support the Silver Market. The inverse relationship is alive and well! Fund activity – The Funds have the allocations to move the market. The rallies often are determined or at least started by fund activity. Investor sentiment – The forecasters are out with newsletters and trade recommendations to spur further buying/selling in the marketplace. There are typically many factors to focus on. The sentiment of the traders is vital. Jitters in the market may support Gold more than Silver now as the Gold has maintained more of the safe-haven sentiment.

effectively stabilizing the prices. but are reluctant to stay in during drawdowns in their investment products. Though it may currently be the most plentiful and affordable of the precious metals. Silver demand – The demand in the physical metals may often control the price action as traders attempt to predict the supplies and usage ratio. but currency values surely can. The margins may prohibit traders from taking the futures positions. Retracements are a necessary part of the equation. they may liquidate metals contracts to suffice for extra margin required to hold other products. the United States government purchased up large stores of the silver. mankind has held it in high regard. and every bit of it still has impact on silver prices today. dumped massive amounts of silver onto the markets. The quarterly profit rose three times in quarterly profit. The metal held immense power until the late 1890s. If you look at the prices for silver since it was first made available to the public. Pan American Silver is one of the largest Silver Mining Companies in the world. but the largest of these reasons involve the state of the economy.     The Chart – The Daily Chart may lead traders to “wait and see” as trader mentality is attracted to the momentum of an already trending market. that is a reflection of the Fibonacci Retracements. Fast forward a bit to the 1970s. such as the Comstock Lode. Though the futures of the mining companies were saved. when precious metals were first offered to consumers for investment purposes. After all. but also when traders are pressured in other sectors. you will see that those prices have risen steadily for over three decades. Understanding the history of silver prices can truly help you to better understand silver prices today. ETF’s – The ETF’s in Silver have had plenty of movement both up and down as traders desire to be in a healthy move.5 million. The power of silver is so absolute that many languages actually use the same word to describe silver and money. . Factors affecting silver prices The price of silver has a long and volatile history. Margin money – Margins may have gone up for Silver itself. but prices dropped suddenly with the discovery of several major silver strikes. and the prices were quickly depressed. using it for decorative purposes and as currency. While we hate to see a washout in the marketplace. From the very first discovery of silver. Silver values never really change much. but the options may be a way to garnish the benefits of the increased volatility and define a prescribed risk for the trade. silver prices did not experience much growth at all. These silver strikes. They boasted revenue rising 40 % to $190. This steady climb is due to several different reasons. Silver miners that were thrilled with their large discoveries soon realized that their sudden success would actually be their downfall. occasionally they are only a reflection of the previous move. trends are hinting that this will not remain the case. To spare these mining companies from destitution.

Dollar strength is often anathema to precious metals prices and affecting silver companies. “European PMIs came in weaker than expected.15 Monday from its $10. Further weakening oil prices were undermining gold and silver on Monday. Peter Fertig.” The oil market is another main driver of precious metals prices. such as the medical creams and photographic supplies that require silver. OPEC has chosen to wait until the December 17 meeting in Algeria to make the cuts. OPEC’s failure to cut production and . Many of the uses for silver render it useless in any other form. precious metals prices experienced heavy drops in light of certain economic factors. because those stores of silver that the government purchased are rapidly dwindling. Silver and gold were both under pressure from a firm dollar. which is another negative factor for the precious metals. said OPEC Secretary General Abdalla el-Badri. On Saturday. You can take advantage of that when the time comes. Supply and demand does have a large part in determining silver prices today.95 per cent to 8. may someday actually surpass gold in desirability and price. Although many expected the oil cartel to announce cutbacks in output. Markets are anticipating a half-point rate cut from the European Central Bank later this week. OPEC leaders met in Cairo to discuss current oil prices and production cuts.26 close on Friday.Consultant.36 points. The dollar index gained 0. “So pressure on the euro increased and stock markets came under heavy selling pressure. it takes more money to buy the same amount of silver. The S&P/TSX Composite Index dropped 6.626. falling oil prices. “Cartel members are turning on each other and pointing fingers and realize that their credibility is being brought into question.4 per cent against a basket of currencies on Monday and the dollar also firmed up 0. Resource stocks were also on the decline in New York with mining stocks plunging 10 per cent.” said Dresdner Kleinwort.8 per cent against the euro. while still the most affordable and plentiful of precious metals. The TSX took a dive and analysts anticipate its six-session streak of gains will hit the skids. too. Resource stocks in general experienced losses. Replenishing these stores of silver isn’t as easy as it once was.When our dollar values drop. All of these factors together mean that silver. Oil futures came under heavy selling pressure and fell more than 7 per cent after news that OPEC’s anticipated production cuts were stalled. By Melissa Pistilli-Exclusive to Silver Investing News Coming out of the Thanksgiving holiday weekend. but only if you buy now. and grim global economic news. The silver quote tumbled as low as $9. Alaron Energies reporter Phil Flynn has suggested that the setback is due in part to infighting amongst OPEC’s leaders.

” said senior analyst at Kitco Bullion Dealers.even more importantly show a united front.9 from 45. Economic news out of China has also “weighed on the commodities sector with renewed urgency. economic data is due out later this week. Precious metals markets will likely be further affected by economic news as more depressing U. falling to 40.S.2 in October. Chief Investment Officer for the Bank of New York Mellon Corp. “The prime focus would be on the U. however in the long-term investors will continue to seek safe haven in gold and silver assets.” said Pradeep Unni. Leo Grohowski. senior analyst at Richcomm Global Services. wealth management unit. Jon Nadler. seems to suggest that they are powerless to do anything to stop the drop in oil prices. non-farm payrolls on Friday which is likely to fall negative for the 11th straight month and by the most since September 2001. The Purchasing Manager’s Index experienced its fourth straight monthly decline in November. has said “the economic news is going to continue to get worse before it gets better. Information on China’s manufacturing activity compiled by CLSA Asia-Pacific Markets reveals that November experienced the sharpest contraction in manufacturing since the survey began in 2004.” No doubt this latest round of market uncertainty will cause short-term weakness in precious metals. .” said Flynn.S.

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