Silver prices and exchange traded funds fell hard on Wednesday due to Eurozone officials’ inability to agree on strong treaty reforms and a debt solution. The iShares Silver Trust (NYSEArca: SLV) lost nearly 6% yesterday due to weak economic news from developed nations and as investors sold precious metals to raise cash.
Spot silver prices were hovering around $29 an ounce on Thursday morning. Silver has strong support at around $26 but if it breaks that, investors can expect the metal to hit around the$21 level, reports Daryl Montgomery for Seeking Alpha.
“It’s not only because of the stronger dollar, the year-end fund redemption and margin call demand from other markets also contributed to the sell-off,” said one Shanghai-based trader on Reuters. “We might see further weakness in prices as the sentiment around Europe remains rather bearish.” [Commodities Sell-Off Crushes Gold, Oil ETFs]
The weaker euro and the stronger U.S. dollar are also affecting the share prices of precious metals. The U.S. dollar has strengthened and is trading at $1.30 to the euro. Due to silver’s industrial applications, it is much more sensitive to a weaker economy and a stronger dollar, says Panos Mourdoukoutas for Forbes. [Gold, Silver ETFs Fall After ECB Comments]
Silver has fallen sharply over the past few days. Analysts believe that the precious metal will continue to drop in share price as economic fundamentals are going to remain weak.
Markets reacted negatively to the news that the Federal Resrve is going to stave off any additional plans for monetary easing. In turn, economic growth in the U.S. is going to remain sluggish. The Eurozone’s ongoing debt crisis is also weighing markets down.
With gold falling through $1,600 an ounce and its 200-day moving average, the near future outlook for silver does not look positive, according to BuillionVault.
iShares Silver Trust
Tisha Guerrero contributed to this article.
Full disclosure: Tom Lydon’s clients own SLV.
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