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Is Silver’s Industrial Personality Leading to Changes?

Posted on 2012-11-05, By A-Best Staff
By Michelle Smith — Exclusive to Silver Investing News

Is Silver's Industrial Personality Leading to Changes?

Silver lacked strength again this week, closing lower each day on the New York spot market. On several occasions it portrayed uncharacteristic behavior that appears to be consistent with its shift toward an industrial personality. Given the macroeconomic backdrop, it seems that as silver moves in that direction, the market’s optimism toward it is decreasing.

The Commodity Futures Trading Commission report for the week ended April 24 showed further cuts in bullish positions in silver. There was a decrease of 5,016 contracts in the net-long position. Also, Barclay’s Capital reported that silver ETP investors dropped 194 tons of the metal last month.

Silver started the week taking direction from industrial metals markets, which were under pressure from a weak euro, weak European equities, and overall concern about the Eurozone. Keeping the company of the industrial commodities appears to be starting to affect how silver reacts.

On Monday, the US dollar was at its lowest level since leap day. Yet silver didn’t receive the benefits that were expected. Instead, the metal took out the prior two sessions lows and closed down $0.26 at $31.01 on the New York spot market.

That follows an uncharacteristic reaction to Friday’s lower-than-expected GDP, which came in at 2.2 as opposed to estimates of 2.5. Silver did not display an overtly positive reaction to the negative news as seen in Q1.

On the contrary, a market comment from CME Group said “the bull camp in silver didn’t seem to be as keen as gold to benefit from the idea that slowing US data could bring the US Fed off the bench sooner rather than later.”

This shift in behavior was seen on a number of occasions throughout the week. The market, which once seemed desperate for poor US economic results, this week seemed to be developing a sense of dread for bad reports. It was as if silver suddenly recognized the implications of being associated with physical commodities instead of being viewed primarily as a precious metal. As price weakness continued, some market watchers even began to suggest that it may take positive US data to give the metal a boost.

Another notable deviation from the so-called norm of correlations occurred in India, where investors were safe haven buying this week. Investors were shifting from equities and forex into metal. However, they did not put their rupees into silver. On Thursday, gold reached an all-time high of R29,695 in India. Still, that is the metal in which the markets sought safety. Generally when the yellow metal gets that kind of attention silver piggybacks to some degree, but not this time. Silver actually declined that day, and the primary concern was reportedly reduced industrial demand.

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