iNVEZZ.com, Monday, September 29: The price of silver for immediate delivery is on course for a third monthly decline and this year’s first quarterly loss, after support from geopolitical tensions was erased by the continued strengthening of the US economy and dollar.
Silver for immediate delivery fell 0.52 percent, or nine cents, to $17.52 as of 08:07 BST. Last Monday it plummeted to $17.34 in intraday trading, the lowest since July 2010. Spot silver has dropped 9.8 percent since the beginning of the month.
The price of silver for December delivery has remained virtually unchanged at $17.53, falling less than a cent as of 07:49 BST on the COMEX in New York. Futures fell to a new four-year low of $17.27 last Thursday.
On Friday US officials raised their estimates for economic growth in the second quarter and consumer sentiment rose in September. The US dollar index (DXY), which compares the greenback against a basket of its peers, has climbed as high as 85.798 and was at 85.646 as of 08:46 BST. On Friday it extended its gains to eleven straight weeks, the longest winning streak since the dollar was allowed to float freely in 1971.
According to last week’s report by the US Commodities Futures Trade Commission (CFTC), speculators have raised their bearish bets on silver. Hedge funds and money managers increased net short positions by 338 to 4,894 contracts. In the seven days ended 19 September speculators switched the market to a net short position for the first time since June.
The recent fall in silver prices has mirrored that of gold as the two metals remain closely correlated.
However, CP Krishnan, whole-time director at Geojit Comtrade, expected silver to remain close to current levels due to steady industrial demand, as cited by The Economic Times. "Unlike gold which is used as jewellery or held as an investment, silver has industrial uses as well".
Traces of silver can be found in most electronic devices, including smart phones and tablets, with around “60 percent of the global demand coming from industrial use”, said Sudip Bandyopadhyay, president of Destimoney Securities, as quoted by The Economic Times.
Meanwhile, the UK government announced on Thursday that it would investigate the various London price benchmarks, including silver, in a similar regulatory inspection to that of Libor. As one or more of these benchmark prices appear to have been manipulated, as Libor was, it can be argued that the same sort of protections should be extended to them:
“The Treasury launched a formal consultation on Thursday to extend the new legislation to cover the foreign exchange, fixed income and commodity markets. Under the proposals, the legislation would cover the London Gold Fixing and the LMBA Silver Price, which determine the price of the precious metals in the London market.”
Based on the most actively traded COMEX contracts, those for December delivery, with a total volume of trade in gold and silver at 23,821 contracts as of 07:59 BST today, the gold:silver ratio is currently at 69.56 up 0.35 percent from last week’s close of 69.31.