After a Month of Crippling Losses, Silver Rises—Why?



Factors supporting precious metals price rises

With the tightening US economy and a likely September liftoff around the corner, the US dollar has been surging to higher levels. But recent nonfarm employment data indicate sluggish economic performance. Since the release of these data, postponing the rate hike now seems to be likely.

The prospect of a delayed liftoff is giving a push to precious metals, which rose on August 10. Silver futures on COMEX rose by 3.7% on a five-day trailing basis and settled at $15.292. Similarly, gold futures rose 0.81% on a five-day trailing basis and closed at $1104.1.

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Silver miners and silver ETFs

Silver miners have been down considerably owing to the declining price of their core assets. Silver futures are down by 2.41% on a 30-day trailing basis and by 2.63% on a year-to-date basis.

Similarly, ETF holdings have fallen considerably, and trading volumes have dried up. The current volume for silver is ~60,000, and the trading price as of August 10 was $15.292, with a high of $15.375 and a low of $14.705.

The iShares Silver Trust (SLV) saw a green day on August 10 and rose 3.05%.

Silver production had been on an upward swing until 2014. And production rose for 12 consecutive years. But due to the current precious metals rout, there could be a considerable cut in 2015 mining activities.

Silver demand

Demand for silver predominantly comes from jewellery, electronics, and other industrial uses. The expected silver deficit for 2015 is ~57 million ounces. There is speculation in the market that this may provide some support to falling silver prices.

Other metals including platinum and palladium experienced a down month. But the last few trading days have been good and have resulted in a positive return on a five-day trailing basis. Platinum and palladium saw a trailing five-day rise of 2.01% and 0.47%, respectively.

Silver mining companies First Majestic Silver (AG), Pan America Silver (PAAS), and Silver Wheaton (SLW) rose by 10.89%, 12%, and 5.35%, respectively, on August 10. Combined, these stocks account for 7.14% of the VanEck Vectors Gold Miners ETF (GDX).

Silver futures have historically seen greater trading volume than silver options. But open interest has been quite close during the last few days. The current open interest for silver futures is ~170,000 contracts.


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