Silver price reaches four-year low as investors reduce long positions

on Sep 22, 2014
Updated: Jun 14, 2024

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The price of silver for immediate delivery has reached a four-year low, as investors cut long positions amid dollar strength and the possibility of a sooner-than-expected US rate hike. Spot silver fell 1.08 percent to $17.61 as of 08:09 BST, after the price plummeted as low as $17.30 per ounce in earlier intraday trading, the worst since June 2010.

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The price of silver for December delivery touched fresh lows as it shed 31 cents to $17.53 as of 07:39 BST on the COMEX in New York and is on course for a second straight session of declines after it fell 3.63 percent on Friday. The settlement closed last week at $17.85, slightly above the intersession low of $17.78 which was the worst performance in over four years.

On a weekly basis, December silver futures lost 76 cents, or 4.08 percent, which was the ninth weekly decline in the past 10 weeks.
As reported by Reuters, Edward Meir analyst at INTL FCStone said in a that he found it hard “to get too excited about the precious metals group at this stage, as poor and uninspiring technicals will likely continue to exert pressure on prices,”

As reported by Business Standard, according to a recent report by Scotiabank silver prices “have returned to the levels seen before the financial crisis that started in 2008 and before quantitative easing (QE) was introduced. It might, therefore, well be into the process of discounting the prospects of an end of QE. For now, however, that seems to be one of the reasons behind the price weakness.”

On Wednesday the Fed reaffirmed its intent that rates would remain ultra-low for a “considerable time” after its quantitative easing bond-buying stimulus programme ends. The Fed announced a further $10 billion reduction in its monthly purchases, leaving the strategy on course to end next month.

The Scotiabank analysis also cites weak market fundamentals as further justification for low prices, as they show a large supply surplus: “Now that investors are not buying much silver through exchange-traded funds (ETFs), less of the supply surplus is being absorbed. That means more of the surplus has weighed on prices.”

According to Friday’s report by the US Commodity Futures Trading Commission (CFTC) hedge funds and money managers switched silver to a net short position for the first time since mid-June.

Based on the most actively traded COMEX contracts, those for December delivery, with a total volume of trade in gold and silver at 63,542 contracts as of 08:39 BST today, the gold:silver ratio is currently at 68.88. In today’s trading gold bought as much as 69.66 ounces of silver, the most since June 2010. Last week the ratio advanced 2.4 percent, after jumping 5.4 percent in August.

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