Silver Unmoved by Geopolitical Crisis

Guest Author William Nixon

Gold prices are still on the rise as tensions in Ukraine and Iraq show no signs of slowing down. However, the precious white metal isn’t showing the same trend as gold’s prices.

Early August, gold futures on New York’s COMEX division settled at 1.25%, while silver’s September fell 2.1%. This is a very unusual movement since both gold and silver futures generally trade very close to each other.

“Unlike gold, silver failed to benefit much from an escalation of geopolitical tensions and instead was worn down by a strengthening dollar,” said Jonathan Butler, a precious metals expert from Mitsubishi Corporation.

Silver’s physical demand was also down for July, with sales in the U.S. falling around 27%. BullionVault’s live price chart shows that the precious white metal’s prices have been fluctuating around $21 – $19 per kilogram from July 10th – present. July had the lowest sales of silver this year, not only for bars and coins but also ETFs.

“TD securities projects a sharp drop in physical silver bar & coin demand in 2014, down 25%, and (in) 2015 down 15%, said Bart Melek, head of strategy for commodities at TD Securities. “This, along with an anticipated reduction in ETF holdings suggests that market is at risk of being awash in the white metal when investors start to perceive that U.S. monetary policy winds are starting change direction later in the year.”

One of the reasons why silver’s prices are being pushed down is strongly because of Eurozone’s economic data. The release of the Markit Flash Purchasing Manager’s Index shows that there’s a positive increase in activity in Europe’s business and employment sector.

“Business activity picked up again in July to suggest that the economy is growing at one of the strongest rates we have seen in the past three years,” said Markit’s chief economist Chris Williamson.

Apart from the Eurozone, the U.S.’ job market is also showing signs of stability. In July, the U.S. Labor Department said jobless data fell from 284,000 to 203,000. It was also in the same month that the U.S. labor department experienced the lowest level of unemployment claims since February 2006.

William Nixon is a guest contributor and is not affiliated with New Constructs, LLC

Feature Photo Credit: Sprott Silver Bars (Flickr)

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