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The silver price is down again… What's going on?

by , 25 September 2014

If you like silver as an investment, you'll probably have noticed that its price has slid once again.

So why is there so much pressure on the silver price?

Let's take a closer look…


Why is the silver price sliding?


A report by Reuters last week showed that silver holdings of exchange traded funds (ETFs) reached all-time highs.

Unfortunately this is a very bearish signal, Dominic Frisby in Money Morning UK explains.

The reason is this. Bear markets don’t come to an end when investors hold record amounts of the asset in question. That’s how bull markets end.

When there are fewer investors owning an asset, it means there are potentially more buyers for it. A lot of investors owning an asset means there are more potential sellers of it.

If many of these silver backed-ETF investors decide to sell their holdings, the price will most likely suffer.

Have a look at the chart below of the silver price. It runs from 1970 to date…


Chart of silver price


As you can see, in 1980, it hit a high of $50 an ounce. It hit that again in 2011. And the pattern emerging is a large saucer shape.

These are the prices that silver appears to return to. $50 in 1980 and 2011. Other key prices are $4, $8, $10, $15, a range between $17 and $22, $26 and $36.

Look at the next chart of the silver price. This shows you the price from 2001 to date.


Chart of silver price levels


Monday saw silver hit $17.50. This could be the low for now. But chances are it could fall more if silver backed-ETFs holdings fall.


Where is the price of silver going?


If this happens, silver has a good chance of falling to $15. But if it breaks through that level, it could be down to $12.50 or $10, or even less.

That would put the majority of silver producers into loss making territory.

The strength of the dollar isn’t helping the silver price. But even before the dollar’s rally, the silver price was under pressure.

It looks like there could still be some downside in the price of silver before any recovery. If you own silver, you could be in for further disappointment.

So there you have it, what’s going on with the price of silver.

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The silver price is down again… What's going on?
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