Silver Lower Before Higher

June 17, 2013 at 11:14


Silver prices are trading on the defensive despite declines in the dollar which  generally make commodity prices more attractive. With the world bank cutting its  long term growth prospects for global growth, precious metals such as silver are  feeling the brunt of lackluster economic growth.

On Thursday, the World Bank reduced its global growth forecast for this year to  2.2%, down from its original forecast released in January of 2.4%. The Bank  reduced its forecast for Emergin Market growth, and sees the euro zone shrinking  0.6%. For the US and Japan, the World Bank increased its forecasts which was  helped by fiscal and monetary stimulus. The World Bank also reduced its 2014  forecast for global growth to 3.0% from 3.1% back in January.

The decline in Silver comes despite a positive reading from the Commerce  Department on Advanced Retail Sales in the US. The headline number increased by  0.6% in May to $421.2 billion. The increase in overall Retail Sales was better  than the average forecast of a 0.4% during the month. Retail sales was up 4.3%  in the past year, and is a strong gauge of GDP given it makes up more than 60%  of overall US growth. The headline growth was driven by a 1.8% increase in auto  sales. Excluding autos, retail sales increased 0.3%.

Despite the decline in silver prices, hedge funds continued to move into long  postions according to the most recent commitment of traders report released by  the CFTC. According to the report, managed money increased long positions by 738  contracts, and reduced short positions by 429 contracts.

Silver 17 06 2013 1 Silver Poised to Slip Lower 

Options trading activity in the silver market has picked up substantially  after the large decline in April. Implied volatility continues to remain  elevated near 31%, which has increased the premiums on both call and put  options. Implied volatity is the markets estimation of how much a security will  move over a specific period of time on an annualized basis.

Silver 17 06 2013 2 Silver Poised to Slip Lower 

The technical picture on a monthly basis for silver prices is ominous. A  close below the 20.50 level would put silver prices back into a large range  between 20 and 10.