Silver price moves sideways after retreating 1.5% yesterday

Silver lost as much as 1.98 percent intraday yesterday to $19.007 a troy ounce – its lowest level since May 2 – but retraced some of its losses to finish the trading day 1.58 percent lower at $19.084.

As of 13:36 BST today it was little changed at $19.082. The precious metal declined as positive economic data emerged from the US and as the crisis in Ukraine was beginning to show signs of de-escalation. Hedge funds and money managers switched to a net short position in silver in the week to May 20, according to data from the Commodity Futures Trading Commission on Friday.

The US Commerce Department announced yesterday at 13:30 BST that the number of orders for long-lasting US manufactured goods increased by 0.8 percent in April, beating the consensus estimate of economists polled by Reuters which pointed to a 0.5 percent decline.

Ukraine held its presidential election over the weekend resulting in a decisive victory for Petro Poroshenko, a billionaire chocolate manufacturer; while the Kremlin indicated its readiness to work with the new government and took positive steps to negotiate a long-contested natural gas deal between the two countries.

Poroshenko has promised to crush the separatists who occupied public buildings in eastern Ukraine in March. However, Russia’s foreign minister has insisted that bringing violence to an end is a precondition for improved ties with Russia. This could leave Ukraine’s new president with little room to manoeuvre, according to the New York Times.

Silver has fallen nearly two percent so far this year, after losing 36 percent in 2013 – its worst performance in more than three decades. However, according to Thomson Reuters, the decline in price spurred demand to record-breaking levels, reaching an all-time high of 1,081 million ounces last year. Concomitantly, there was a significant physical deficit of 103 million ounces, compared to the 51-million-ounce surplus in 2012.

Andrew Leyland, manager of the metals consultancy Thomson Reuters GFMS, expects silver to average $19 this year, and $18.5 in 2015, citing rising risk appetite among investors, and a decline in exchange-traded fund (EFT) holdings, as reasons.

“The case for holding physical assets in a rising interest rate environment, and in an improving global economy, will continue to be undermined,” Leyland argued, according to Forbes.